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

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition of NanoVibronix, Inc. and its subsidiaries (collectively, the "Company") as of June 30, 2025, should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report"). This discussion and analysis should be read in conjunction with the Company's audited financial statements and related disclosures as of December 31, 2024, and for the year then ended, which are included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on June 30, 2025. References in this Management's Discussion and Analysis of Financial Condition and Results of Operations to "us," "we," "our," and similar terms refer to the Company and its subsidiaries.

Overview

We were organized as a Delaware corporation in October 2003. On February 14, 2025, we completed the Merger pursuant to the Merger Agreement, as further described below. Following the consummation of the Merger, NanoVibronix will conduct its operations through its two wholly-owned subsidiaries: (i) NanoVibronix Ltd., a private company incorporated under the laws of the State of Israel ("Nano OpCo") and (ii) ENvue Medical Holdings LLC, a Delaware limited liability company (together with its respective subsidiaries, "ENvue"). Nano OpCo focuses on non-invasive biological response-activating devices that target biofilm prevention, pain therapy, and wound healing and can be administered at home, without the assistance of medical professionals. ENvue is a medical device company engaged in the research, development, production, marketing, and sale of medical devices in the field of enteral feeding and are in the initial stage of commercializing our products.

Agreement and Plan of Merger

On February 14, 2025, pursuant to the terms of that certain Agreement and Plan of Merger (the "Merger Agreement"), dated as of February 14, 2025, by and among us, NVEH Merger Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company ("First Merger Sub"), NVEH Merger Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company ("Second Merger Sub"), and ENvue Medical Holdings, Corp. ("Predecessor ENvue" or "ENvue"), the Company and Predecessor ENvue effected (i) a merger of First Merger Sub with and into Predecessor ENvue, with the First Merger Sub ceasing to exist and Predecessor ENvue becoming a wholly-owned subsidiary the Company and (ii) the merger of Predecessor ENvue with and into Second Merger Sub (the "Second Merger" and, together with the First Merger, the "Merger"), with Second Merger Sub being the surviving entity of the Second Merger ("Surviving Entity"). At the effective time of the Second Merger, the certificate of formation of the Surviving Entity was amended and restated to, among other things, to change the name of the Surviving Entity to "ENvue Medical Holdings LLC." In connection with the Merger Agreement, we issued (i) 3,318 shares of common stock (the "Merger Shares"), which such number of shares represented no more than 4.9% (the "Exchange Cap") of the outstanding shares of common stock as of immediately before the First Effective Time and (ii) Pre-Funded Warrants to purchase up to 12,526 shares of our common stock (the "Merger Pre-Funded Warrants") at an exercise price of $0.001 per share, and (iii) 5,772 shares of Series X Non-Voting Convertible Preferred Stock (the "Series X Preferred Stock") in excess of the Exchange Cap to the holders of Predecessor ENvue in consideration for 100% of Predecessor ENvue. Each share of Series X Preferred Stock will be convertible into 100 shares of our common stock, subject to and contingent upon the affirmative vote of a majority of the shares of common stock present or represented and entitled to vote at a meeting of stockholders of Company to approve, for purposes of the Nasdaq Listing Rules, the issuance of shares of our common stock to the stockholders of Predecessor ENvue upon conversion of any and all shares of Series X Preferred Stock in accordance with the terms of the Certificate of Designation for the Series X Non-Voting Convertible Preferred Stock.

The Merger was consummated and completed on February 14, 2025.

Recent Developments

August 2025 Reverse Stock Split

On August 8, 2025, we filed a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-10 reverse stock split of the shares of our common stock, par value $0.001 per share, either issued and outstanding or held by us as treasury stock, effective as of 4:05 p.m. (Delaware time) on August 11, 2025 (the "August 2025 Reverse Stock Split"). All common stock share and per share amounts in this Quarterly Report have been adjusted to give effect to the August 2025 Reverse Stock Split and the 1-for-11 reverse stock split of our common stock effectuated in March 2025, unless otherwise stated.

Private Placement of Series H Preferred Stock

On July 18, 2025, we entered into a Securities Purchase Agreement (the "Series H Purchase Agreement") with a certain institutional investor (the "Series H Investor"), pursuant to which it agreed to sell to the Series H Investor (i) an aggregate of 889 shares of our newly-designated Series H Convertible Preferred Stock, with a par value of $0.001 per share and a stated value of $10,000 per share (the "Stated Value"), initially convertible into up to 880,099 shares of our common stock, at an initial conversion price of $10.10 per share (the "Series H Preferred Stock") pursuant to the Certificate of Preferences, Rights and Limitations of the Series H Convertible Preferred Stock (the "Series H Certificate of Designations") and (ii) warrants to acquire up to an aggregate of 467,836 shares of common stock (the "Series H Warrants") at an exercise price of $22.50 (such closing, the "July 2025 Initial Closing").

Pursuant to the terms of the Series H Purchase Agreement, we have also agreed to issue 222 shares of Series H Preferred Stock with a total stated value of $2,222 in a second closing, subject to the satisfaction of customary closing conditions. Additionally, pursuant to the terms of the Series H Purchase Agreement, we have agreed that during the period ending 36 months from the effective date of the registration statement (the "Resale Registration Statement") registering the resale of the shares of common stock underlying the Series H Preferred Stock and the Series H Warrants, the Series H Investor shall have the right, but no obligation, upon notice to us from time to time, to purchase up to an aggregate of $44,000 stated value (representing 4,400 shares of Series H Preferred Stock and $39,600 of subscription amount) of additional Series H Preferred Stock, which shall have identical terms to the Series H Preferred Stock issued at the Series H Initial Closing, except that the initial conversion price of such additional shares of Series H Preferred Stock shall be equal to 85% of the arithmetic average of the three (3) lowest VWAPs during the ten trading days prior to the date of the Series H Investor's exercise of such right.

The Series H Initial Closing occurred on July 22, 2025 (the "Closing Date"). The aggregate gross proceeds from the Series H Initial Closing were $8 million, prior to deducting placement agent fees and other offering expenses payable by us.

Among other covenants, the Series H Purchase Agreement requires us to hold a meeting of our stockholders at the earliest practicable date to seek approval (the "Stockholder Approval") under Nasdaq Stock Market Rule 5635(d) for the issuance of shares of common stock in excess of 19.99% of our issued and outstanding shares of common stock at prices below the "Minimum Price" (as defined in Rule 5635 of the Rules of the Nasdaq Stock Market) on the date of the Series H Purchase Agreement pursuant to the terms of the Series H Preferred Stock and the applicable Series H Warrants and shall hold a meeting every four months thereafter if Stockholder Approval to seek Stockholder Approval until the earlier of the date Stockholder Approval is obtained or the Preferred Stock is no longer outstanding. Additionally, pursuant to the terms of the Series H Purchase Agreement, we have also agreed to file the Resale Registration Statement as soon as reasonably practicable.

Underwritten Public Offering, Series G Convertible Preferred Stock

On May 16, 2025, we announced the closing of an underwritten public offering (the "2025 Underwritten Offering") of 40,000 shares of our Series G Convertible Preferred Stock ("Series G Preferred Stock"), with a par value $0.01 per share and a stated value equal to $250, and warrants to purchase up to 490,198 shares of common stock, par value $0.01 per share at an exercise price of $20.40 per share (the "May 2025 Warrants"). The combined public offering price of each share of Series G Preferred Stock together with an accompanying May 2025 Warrant was $250.00. The May 2025 Warrants have a term of five years from the initial issuance date and are exercisable immediately upon issuance. We also issued to Dawson James Securities, Inc. warrants (the "May 2025 Representative's Warrants") to purchase up to 24,510 shares of common stock, which such May 2025 Representative's Warrants have substantially the same terms as the May 2025 Warrants except that the May 2025 Representative's Warrants expire five years from the date of commencement of sales in the 2025 Underwritten Offering.

On May 15, 2025, prior to the closing of the 2025 Underwritten Offering, we filed the Certificate of Preferences, Rights and Limitations of the Series G Convertible Preferred Stock (the "Series G Certificate of Designations") with the Secretary of State of the State of Delaware, which became effective upon filing. Pursuant to the terms of the Series G Certificate of Designations, the holders of the Series G Preferred Stock are entitled to receive cumulative dividends at the rate per share of 9% per annum of the stated value per share until the fifth anniversary of the date of issuance of the Series G Preferred Stock, which such dividends may be paid, at our option, in up to an aggregate of 220,588 shares of common stock. The Series G holder may convert at any time and receive the full amount of dividends.

The aggregate net proceeds of the 2025 Underwritten Offering were approximately $8.2 million, after deducting approximately $1.8 million of underwriting discounts, commissions and other offering costs and expenses.

Certificate of Amendment to Series X Certificate of Designations, Series X Amendment Agreement

On May 12, 2025, we entered into an Amendment Agreement (the "Series X Amendment Agreement") with the Requisite Series X Holders (as defined in the Certificate of Designations of the Series X Non-Voting Convertible Preferred Stock (as amended, the "Series X Certificate of Designations")). Pursuant to the Series X Amendment Agreement, the Requisite Series X Holders agreed to amend the Series X Certificate of Designations by filing a Certificate of Amendment ("Series X Certificate of Amendment") to the Series X Certificate of Designations with the Secretary of State of the State of Delaware to (i) increase the number of authorized shares of Series X Preferred Stock (as defined below) from 5,772 shares to 6,222 shares and (ii) upon the closing of the 2025 Underwritten Offering, to reduce the conversion price of the Series X Preferred Stock to $20.40, the conversion price of the Series G Preferred Stock.

On May 12, 2025, we filed the Series X Certificate of Amendment with the Secretary of State of the State of Delaware, thereby amending the Series X Certificate of Designations. The Series X Certificate of Amendment became effective with the Secretary of State of the State of Delaware upon filing.

April 2025 Promissory Note and Guaranty

On April 11, 2025, ENvue issued a promissory note (the "April Note") to Alpha Capital Anstalt (the "Lender") in the principal amount of $360 thousands (the "April Note Principal Amount"), together with all accrued interest thereon. The April Note has a maturity date of June 11, 2025 (the "April Note Maturity Date") and on the April Note Maturity Date, the aggregate unpaid April Note Principal Amount, all accrued and unpaid interest and all other amounts payable under the April Note shall be due and payable. The April Note bears interest at an annual rate equal to 8.0% and is payable "in kind" by adding such accrued interest to the April Note Principal Amount.

Pursuant to the terms of the April Note, commencing on the date of the issuance and sale of any shares common stock or Common Stock Equivalents (as defined in the April Note) by us, the Lender may require ENvue to redeem all or a portion of the April Note with the proceeds of such issuance and sale (the "Redemption Right"). The Redemption Right may be redeemed at any time after date of such issuance and sale by the Lender providing to ENvue written notice specifying the principal amount of the Note to be redeemed (the "Redemption Amount"), and the Redemption Amount shall be due and payable by ENvue on the second business day after the date of such notice.

The April Note additionally provides for certain customary events of default which upon occurrence, the Lender may, at its option, declare the entire April Note Principal Amount together with all accrued interest and all other amounts payable under the April Note immediately due and payable, provided however, that if a bankruptcy event occurs, the April Note Principal Amount and accrued interest on the April Note shall become immediately due and payable without any notice, declaration or other act on the part of the Lender.

In connection with ENvue's issuance of the April Note, on April 11, 2025, we entered into that certain Guaranty (the "Guaranty") in favor of the Lender, pursuant to which we have agreed to guarantee to the Lender the payment of all obligations and liabilities of ENvue under the April Note, including, without limitation, for principal, interest and any other amounts due and payable by ENvue under the April Note (the "Guaranteed Obligations"). Upon the occurrence of an Event of Default (as defined in the April Note), the Guaranteed Obligations shall be deemed immediately due and payable at the election of Lender and we shall pay on demand the Guaranteed Obligations to Lender. The April Note was repaid in full during the second quarter of 2025.

Nasdaq Minimum Stockholder's Bid Price Requirement and Minimum Stockholder's Equity Requirement

As previously disclosed, on April 10, 2024, we received a letter (the "Letter") from the Listing Qualifications Department (the "Staff") of The Nasdaq Stock Market LLC indicating that, based upon the closing bid price of our Common Stock for the 30 consecutive business days between February 27, 2024 and April 9, 2024, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule"). The Letter also indicated that we were provided with a compliance period of 180 calendar days, or until October 7, 2024, in which to regain compliance with the Bid Price Rule pursuant to Nasdaq Listing Rule 5810(c)(3)(A). We did not regain compliance with the Bid Price Rule by October 7, 2024, and on October 8, 2024, Nasdaq notified us that our securities were subject to delisting from Nasdaq unless we timely requested a hearing before the Nasdaq Hearings Panel (the "Panel"). We subsequently timely requested a hearing before the Panel, which was held on December 5, 2024 (the "Hearing").

On November 19, 2024, we received an additional deficiency notice from the Staff indicating that we no longer satisfied the $2.5 million stockholders' equity requirement set forth in Nasdaq Listing Rule 5550(b)(1) (the "Equity Rule") for continued listing on Nasdaq. The Staff indicated that our non-compliance with the Equity Rule would be considered by the Panel at the Hearing and could serve as an additional basis for delisting of our securities from Nasdaq.

On December 26, 2024, we received a decision letter (the "Decision Letter") from the Panel granting a limited extension of time for us to demonstrate compliance with the Bid Price Rule and the Equity Rule for continued listing on Nasdaq, subject to the following conditions: (i) on or before February 27, 2025, we will have obtained stockholder approval to effect a reverse stock split; (ii) on or before March 31, 2025, we shall have effected a reverse stock split and, thereafter, maintain a $1.00 closing bid price of our common stock for a minimum of ten consecutive trading days; (iii) on or before March 31, 2025, we are required to demonstrate compliance with the Equity Rule by filing public disclosure with the SEC and demonstrate long-term compliance with the Equity Rule; and (iv) on or before March 31, 2025, we are required to demonstrate compliance with all continued listing requirements for Nasdaq. On February 24, 2025, we obtained approval from our stockholders to file a certificate of amendment to our Certificate of Incorporation to effectuate the Reverse Stock Split, among others, and on March 13, 2025, the Reverse Stock Split became effective.

On April 9, 2025, we received a letter (the "April Letter") from the Staff notifying us that we had demonstrated compliance with the Bid Price Rule and the Equity Rule as required by the Panel pursuant to the Decision Letter.

Pursuant to the April Letter, we are subject to a mandatory panel monitor for a period of one year from the date of the April Letter. If, within that one-year monitoring period, Staff finds us again out of compliance with the Equity Rule that was subject of the exception, notwithstanding Rule 5810(c)(2), we will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and Staff will not be permitted to grant additional time for us to regain compliance with respect to that deficiency, nor will the company be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3). Instead, Staff will issue a Delist Determination Letter and we will have an opportunity to request a new hearing with the Panel or a newly convened Hearings Panel if the initial Panel is unavailable.

Critical Accounting Policies and Significant Estimates

This management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates if conditions differ from our assumptions. While our significant accounting policies are more fully described in Note 3 - Summary of Significant Accounting Policies in the "Notes to Financial Statements", we believe the following accounting policies are critical to the process of making significant estimates in preparation of our financial statements.

Inventory

Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Cost is determined using the "first-in, first-out" method.

Inventory write-offs are provided to cover risks arising from slow-moving items or technological obsolescence. The Company periodically evaluates the quantities on hand relative to current and historical selling prices and historical and projected sales volume. Based on this evaluation, provisions are made when required to write-down inventory to its net market value.

Impairment of long-lived assets

Management reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable under the provisions of accounting for the impairment of long-lived assets. If it is determined that an impairment loss has occurred based upon expected future cash flows, the loss is recognized in the Consolidated Statements of Operations.

Goodwill impairment

Management also evaluates goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Any impairment loss is recognized in the Consolidated Statements of Operations.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance. The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480, and meet all of the requirements for equity classification, including whether the warrants are indexed to the Company's own common stock and whether the warrant holders could potentially require "net cash settlement" in a circumstance outside of the Company's control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding. Warrants that meet all the criteria for equity classification, are required to be recorded as a component of additional paid-in capital. Warrants that do not meet all the criteria for equity classification, are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value at each balance sheet date thereafter. The liability-classified warrants are recorded under non-current liabilities. Changes in the estimated fair value of the warrants are recognized in Financial expenses or income in the unaudited interim condensed consolidated statements of operations.

Revenue recognition

Revenues from product and services are recognized in accordance with ASC 606 "Revenue Recognition." Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that create(s) enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer.

The Company's performance obligation is generally the sale and delivery of its products. Revenues from product sales is recorded at the net sales price, or "transaction price," which includes estimates of variable consideration that result from discounts as well as allowances for returns. Revenue from product sales is recognized at a point in time when control of the product is transferred, which is generally upon shipment to the customer.

Regarding its ENvue sales, the Company regularly sells its Systems and Nasoenteral tubes on a stand-alone basis and therefore concludes these products are separate performance obligations. Revenue from product sales is recognized at a point in time when control of the product is transferred, which is generally upon shipment to the customer. Revenue from training services is recognized over time, while the Company provides the services, which are usually completed in under a week. Revenue from training services is recognized over time, while the Company provides the services, which are usually completed in under a week.

The Company also concluded that training services are capable of being distinct and separately identifiable and therefore should be accounted for as a separate performance obligation. When a contract includes one of these products or services, the entire transaction price is allocated to that product or service. When a contract includes a combination of products and services, the transaction price is allocated to each performance obligation on a stand-alone selling price basis. The stand-alone selling prices are generally determined based on the prices at which the Company separately sells the products and services.

The Company's contracts with its ENvue customers generally do not include rights of return.

For customers of both NanoVibronix and ENvue, payments are typically due between 30 and 60 days.

The Company applied the practical expedient in ASC 606 and did not evaluate payment terms of one year or less for the existence of a significant financing component. The related revenue is recognized net of any taxes collected from customers which are subsequently remitted to governmental entities (e.g., sales tax and other indirect taxes). The Company elected to not disclose information about the remaining performance obligations that have original expected durations of one year or less.

In some of its contracts, the Company provides assurance type warranty services to its customers, in accordance with legal provisions or industry standards to ensure the quality of the products. As such, the Company recognizes a provision for warranties in its financial statements as applicable. As of June 30, 2025, the Company's provision for warranty amounted to $64.

Stock-based compensation

We rely on the Black-Scholes option pricing model for estimating the fair value of stock-based awards granted, and expected volatility is based on the historical volatilities of peer company's common stock. Stock options generally vest over one or two years from the grant date and generally have ten-year contractual terms. The Company recognizes forfeitures of awards as they occur. Information about the assumptions used in the calculation of stock-based compensation expense is set forth in Notes 3 and 5 in the "Notes to Financial Statements".

Income taxes

We account for income taxes in accordance with ASC 740, "Income Taxes". This topic prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We provide full valuation allowance, to reduce deferred tax assets to the amount that is more likely than not to be realized.

We implemented a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% (cumulative basis) likely to be realized upon ultimate settlement.

We recognize interest and penalties related to uncertain tax positions on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.

Recently issued accounting standards

In December 2023, the Financial Accounting Standard Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation as well as information on income taxes paid. The guidance is effective for the Company for annual periods beginning January 1, 2025. The Company is currently evaluating the impact on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40), Disaggregation of Income Statement Expenses, which requires disclosure of disaggregated information about certain expense captions presented in the Consolidated Statements of Operations as well as disclosure about selling expense. The guidance will be effective for the Company for annual periods beginning January 1, 2027 and interim periods beginning January 1, 2028, with early adoption permitted. It could be applied either prospectively or retrospectively. The Company is currently evaluating the impact on its financial statement disclosures.

In July 2025, the FASB issued Accounting Standards Update No. 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets" ("ASU 2025-05"), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets. ASU 2025-05 will be effective for annual periods beginning after December 15, 2025 and interim periods within those annual reporting periods and should be applied prospectively. The Company is currently evaluating the impact of ASU 2025-05 on its consolidated financial statements and related disclosures.

For a summary of recent accounting pronouncements applicable to our consolidated financial statements see Note 3, "Summary of Significant Accounting Policies" to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024

Revenues. For the three months ended June 30, 2025, and 2024, our revenues were approximately $494 thousand and $817 thousand, respectively, a decrease of approximately 40%, or $323 thousand, between the periods. The decrease was due primarily attributable to reduced sales to Nanovibronix's largest distributor in 2025. The consolidated results now include ENvue's revenue beginning on the date of ENvue Merger (February 14^th, 2025), which mitigated some of the reduction in revenues. Our revenues may fluctuate as we add new consumers or when existing distributors or consumers make large purchases of our products during one period and no purchases during another period. Therefore, any growth or decrease in revenues by quarter may not be linear or consistent. We do not anticipate that our revenues will be impacted by inflation or changing prices in the foreseeable future.

For the three months ended June 30, 2025, and 2024, the portion of our revenues that was derived from our largest direct medical equipment distributor, Ultra Pain Products LLC, were 4% and 38%, respectively, and customers introduced by our two largest sales representatives were 82% and 41%, respectively.

Gross Profit. For the three months ended June 30, 2025, and 2024, gross profit was approximately negative $35 thousand and positive $428 thousand, respectively, a decrease of approximately 108% or $463 thousand. The decrease of the gross profit as well as the underlying gross margin percentage was mainly due to the write off of $159 thousand of inventory and the amortization of technology of $186 thousand.

Gross profit as a percentage of revenues were approximately negative 7% and positive 52% for the three months ended June 30, 2025, and 2024, respectively. The decrease in gross profit as a percentage of revenues is mainly due to the reasons described above.

Research and Development Expenses. For the three months ended June 30, 2025, and 2024, research and development expenses were approximately $972 thousand and $187 thousand, respectively, an increase of approximately 420%, or $785 thousand between the periods. The increase was mainly due to the costs of our clinical trial test program with the University of Michigan of approximately $624 thousand and the inclusion of ENvue's operations following the ENvue Merger.

Research and development expenses as a percentage of total revenues were approximately 197% and 23% for the three months ended June 30, 2025, and 2024, respectively.

Our research and development expenses consist mainly of expenses related to subcontracting research and development and clinical trial activities, as well as payroll expenses to employees, and the associated facilities' costs, who are involved with research and development activities.

Selling and Marketing Expenses. For the three months ended June 30, 2025, and 2024, selling and marketing expenses were approximately $717 thousand and $199 thousand, respectively, an increase of approximately 260%, or $518 thousand between the periods. The increase was primarily due to the inclusion of ENvue's operations following the ENvue Merger.

Selling and marketing expenses as a percentage of total revenues were approximately 145% and 24% for the three months ended June 30, 2025, and 2024, respectively.

Selling and marketing expenses consist mainly of payroll expenses to direct sales and marketing employees, stock-based compensation expenses, travel expenses, conventions, advertising and marketing expenses, rent and facilities expenses associated with and allocated to selling and marketing activities.

General and Administrative Expenses. For the three months ended June 30, 2025, and 2024, general and administrative expenses were approximately $2,252 thousand and $716 thousand, respectively, an increase of approximately 215%, or $1,536 thousand between the periods. The increase was primarily due the costs of professional fees incurred related to our Merger. Furthermore, the inclusion of ENvue's operations following the ENvue Merger which increased the general and administrative expenses by approximately $748 thousand.

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, stock-based compensation expenses, accounting, legal and facilities expenses associated with general and administrative activities and costs associated with being a publicly traded company.

General and administrative expenses as a percentage of total revenues were approximately 456% and 88% for the three months ended June 30, 2025, and 2024, respectively.

Financial income, net. For the three months ended June 30, 2025 and 2024, financial income, net was approximately $211 thousand compared to $24 thousand, respectively, an increase of approximately $187 thousand between the periods mainly due to the change in fair value of warrant liability of $1,410 thousand, offset by $1.1 million in professional fees related to the warrant liability and the inclusion of ENvue's operations following the ENvue Merger added $11 thousand of financial expense.

Interest expense. For the three months ended June 30, 2025, and 2024, our interest expenses were $144 thousand and $34 thousand, respectively. This primarily pertains to the amortization of debt discount on the Alpha loans (see note 9).

Income tax expense. For the three months ended June 30, 2025, our income tax expense was approximately $62 thousand as compared to $4 thousand in the three months ended June 30, 2024.

Net Loss. Our net loss for the three months ended June 30, 2025, increased by approximately $3,283 thousand, or 477%, reaching approximately $3,971 thousand, compared to a net loss of approximately $688 thousand for the same period in 2024. This increase in net loss was primarily due to the factors described above.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024

Revenues. For the six months ended June 30, 2025 and 2024, our revenues were approximately $1,519 thousand and $1,738 thousand respectively, a decrease of approximately 13%, or $219 thousand between the periods. The decrease reflects high revenues in 2024 from certain channels, including sales to Veteran Administration facilities, patients covered under workman's compensation programs referred to by specific sales representatives, and purchases through UPPI. These revenues did not recur at the same level in 2025. Our revenues may vary from period to period, as new customers are added and existing distributors or consumers may make significant purchases in one quarter and no purchases in the following quarter. Accordingly, revenue trends should not be expected to follow a linear or consistent pattern.

Gross Profit. For the six months ended June 30, 2025 and 2024, gross profit was approximately $334 thousand and $1,092 thousand, respectively, a decrease of approximately 69% or $758. The decrease was mainly due to the write off of $159 thousand of inventory and the addition of ENvue products which were sold at lower gross margins than Nanovibronix products in 2024.

Gross profit as a percentage of revenues was approximately 22% and 63% for the six months ended June 30, 2025 and 2024, respectively. The decrease of the gross margin percentage was mainly due to the write off of $159 thousand of inventory and the amortization of technology of $186 thousand.

Research and Development Expenses. For the six months ended June 30, 2025 and 2024, research and development expenses were approximately $1,502 thousand and $308 thousand, respectively, an increase of approximately 388%, or $1,194 thousand, between the periods. The increase was mainly due to the costs of our clinical trial test program with the University of Michigan of approximately $624 thousand and the inclusion of expenses from ENvue's operations following the ENvue Merger of approximately $318 thousand.

Our research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, stock-based compensation expenses, expenses related to subcontracting, patents application and registration, clinical trial and facilities expenses associated with and allocated to research and development activities.

Research and development expenses as a percentage of total revenues were approximately 99% and 18% for the six months ended June 30, 2025 and 2024, respectively.

Selling and Marketing Expenses. For the six months ended June 30, 2025 and 2024, selling and marketing expenses were approximately $1,066 thousand and $364 thousand, respectively, a decrease of approximately 193%, or $702 thousand, between the periods. The increase was primarily due to the inclusion of approximately $741 thousand in expenses from ENvue's operations following the ENvue Merger.

Selling and marketing expenses consist mainly of payroll expenses to direct sales and marketing employees, stock-based compensation expenses, travel expenses, conventions, advertising and marketing expenses, rent and facilities expenses associated with and allocated to selling and marketing activities.

Selling and marketing expenses as a percentage of total revenues were relatively steady totaling approximately 70% and 21% for the six months ended June 30, 2025 and 2024, respectively.

General and Administrative Expenses. For the six months ended June 30, 2025 and 2024, general and administrative expenses were approximately $3,594 thousand and $1,662 thousand, respectively, an increase of approximately 116%, or $1,932 thousand, between the periods. The increase was primarily due to professional fees incurred in connection with our Merger. Additionally, the inclusion of ENvue's operations following the ENvue Merger led to an increase of approximately $939 thousand in general and administrative expenses.

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, stock-based compensation expenses, accounting, legal and facilities expenses associated with general and administrative activities and costs associated with being a publicly traded company.

General and administrative expenses as a percentage of total revenues were approximately 237% and 96% for the six months ended June 30, 2025 and 2024, respectively.

Financial income, net. For the six months ended June 30, 2025 and 2024, financial income, net was approximately $259 thousand compared to an expense of $45 thousand, respectively, an increase of approximately $214 thousand between the periods mainly due to the change in fair value of warrant liability of $1,410 thousand, offset by $1.1 million in professional fees related to the warrant liability and the inclusion of ENvue's operations following the ENvue Merger added $13 thousand of financial expense.

Interest expense. For the six months ended June 30, 2025 and 2024, interest expense was $197 thousand and $68 thousand, respectively. This primarily pertains to the amortization of debt discount on the Alpha loans (see note 9 to the consolidated condensed interim financial statements).

Income tax expenses. For the six months ended June 30, 2025 and 2024, tax expenses were $77 thousand and $11 thousand, respectively.

Net loss. Our net loss for the six months ended June 30, 2025, decreased by approximately $4,567 thousand, or 358%, totaling approximately $5,843 thousand, compared to a net loss of approximately $1,276 thousand for the same period in 2024. This decrease in net loss was primarily due to the factors described above.

Liquidity and Capital Resources

Going Concern

As of June 30, 2025, the Company incurred recurring losses and negative cash flows from operations and had an accumulated deficit of $75,988. For the six months ended June 30, 2025, the Company used approximately $4,726 of cash in operating activities. During the same period, the Company received approximately $8,215 in net proceeds from the issuance of Series G Convertible Preferred Stock, $360 from the issuance of a short-term loan payable, $1,300 in proceeds from issuance of notes payable to a related party, and $102 from the exercise of options, and made payments on loans totaling $2,077. As a result, the Company reported a cash balance of approximately $4,060 as of June 30, 2025. Subsequent to period end, on July 18, 2025, the Company received gross proceeds of $8,000 from the sale of Series H Convertible Preferred Stock.

Because the Company does not have sufficient resources to fund our operation for the next twelve months from the date of the issuance of these unaudited interim condensed consolidated financial statements, management has substantial doubt regarding the Company's ability to continue as a going concern. During the six months ended June 30, 2025, we met our short-term liquidity requirements from our existing cash reserves. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products, our development of future products and competing technological and market developments. We expect to continue to incur losses and negative flows from operations. We intend to use the proceeds generated from equity financings, or strategic alliances with third parties, either alone or in combination with equity financing to meet our short-term liquidity requirements as well as to advance our long-term plans. There are no assurances that we are able to raise additional capital, as required, on terms favorable to us.

We do not have any material commitments to capital expenditures as of June 30, 2025, and we are not aware of any material trends in capital resources that would impact our business.

As of June 30, 2025, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Major Change in Assets and Total Reportable Assets

As discussed in Note 4, the major changes in assets and total reportable assets are primarily attributable to the merger. These changes reflect the revaluation and consolidation of assets from the merger, which significantly impacted the overall asset base of the Company. The changes in assets are consistent with the terms and conditions outlined in the merger agreement and are considered a direct result of the transaction.

Summary of Cash Flow

General. As of June 30, 2025, we had cash of approximately $4,060, compared to approximately $752 as of December 31, 2024. We have historically met our cash needs through a combination of issuance of equity, borrowing activities and sales. Our cash requirements are generally for product development, research and development costs, marketing and sales activities, general and administrative costs, capital expenditures and general working capital.

Cash used in our operating activities was approximately $4,726 for the six months ended June 30, 2025, and approximately $1,132 for the same period in 2024.

Cash provided in our investing activities was approximately $139 and cash used in investing activities was $3 for the six months ended June 30, 2025, and 2024, respectively. Cash provided in the six months ended June 30, 2025, is mainly from the cash acquired in the Merger.

Cash provided by financing activities during the six months ended June 30, 2025, was approximately $7,900, primarily resulting from net proceeds of $8,215 from the sale of Series G Preferred Stock, $1,300 in proceeds from issuance of notes payable to a related party, $360 from the issuance of a short-term loan payable, and $102 in proceeds from exercise of options, partially offset by payments of $1,300 on a related party note payable and $777 on a short-term loan to a related party. The Company's future capital requirements and the adequacy of available funds will depend on a variety of factors, including the successful commercialization of its products, the development of future product offerings, and the impact of technological advancements and competitive market dynamics.

Factors That May Affect Future Operations

We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment as well issues that may continue to occur due to the development of the coronavirus outbreak. Our operating results could also be impacted by increased tariffs which may add additional costs to our manufacturing process, the hostilities in Israel, and the Middle East, including the interruption or curtailment of trade within Israel or between Israel and its trading partners, or the ability to ship our products overseas or a weakening of the Euro and strengthening of the New Israeli Shekel, or NIS, both against the U.S. dollar. Lastly, other economic conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products.

Known Trends, Events and Uncertainties

Following a review, we have identified certain inaccuracies in our 510(k) application for the PainShield MD Plus product, and have submitted a request to FDA to withdraw the clearance. The company is unaware of any safety issue related to PainShield MD Plus, but intends to halt future sales of the product.

The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including but not limited to, risks associated with completing studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. In addition, the consequences of the ongoing geopolitical conflicts, such as the ongoing conflict between Russia and Ukraine and the ongoing conflict between Israel and Hamas, including related sanctions and countermeasures, and the effects of rising global inflation, 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. Additionally, recent changes to U.S. policy implemented by the U.S. Congress, the Trump administration or any new administration have impacted and may in the future impact, among other things, the U.S. and global economy, tariffs, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business. For a further discussion of factors that may affect future operating results see the section entitled "Risk Factors" of this Quarterly Report. Other than as discussed above and elsewhere in this Quarterly Report, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.