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

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

You should read the following discussion and analysis of our financial condition and results of operations with our unaudited interim condensed consolidated financial statements for the nine months ended September 30, 2025 and 2024, together with related notes thereto. The following discussion contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. You should review the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. In this section, unless otherwise specified, the terms "we", "our", "us", the "Company" and "FireFly" refer to FireFly Automatix, Inc. All dollar amounts are expressed in thousands of United States dollars ("$"), unless otherwise indicated.

Company Overview

Since 2010, we have been passionate about becoming a leader in the turfgrass industry as a firm that designs, manufactures, sells and supports products that we believe have the potential to disrupt the turf harvesting, sports turf and golf markets through automation, robotics and both labor cost savings and energy efficiency. We have expanded our turfgrass expertise and have had success in Europe, Australia, the Asia Pacific region, and other international markets.

We are a growth-oriented technology company with internally developed proprietary software that is integrated with our patented mechatronic systems. We have embedded our technology into the design, development, and manufacturing of our PATH and our most current AEV robotic mowers, the AMP, including our AMP-L100 and AMP-X100 models. Our PATH machines are comprised of our ProSlab Harvester and R300 Roll Machine. Our AMPs come in two models: one with a 5-gang reel, the AMP-L100, and another with a 5-gang rotary mower, the AMP-X100.

We began emerging as an AgTech innovator in 2023 with the introduction of our AMP-L100, which we began marketing and selling in 2024. These industrial, self-driving, AEV robotic mowers represent our first solution specifically designed for the unique requirements of the golf course, sports field, government, real estate, and turfgrass mowing markets. We believe that our AMPs provide a unique mowing approach that is both environmentally sound and business friendly. Our AMPs have been adopted by a number of prominent country clubs and golf courses due to their precision mowing capabilities, regulatory compliance with emission standards, and significant labor cost savings. Our current turf farm customers are embracing our AMPs for the quality of cut and flexibility in mowing their farms during the nighttime hours. We believe that we have designed our AMPs to specifically target the demanding needs of our target mowing markets.

We are dedicated to being at the forefront of global AgTech innovations and determined to protect our position as a leading technology supplier to turfgrass producers worldwide, while also extending our impact into the mowing opportunities outlined above. We believe we have assembled a highly qualified team of engineers and software developers with extensive experience in the AgTech arena as well as complementary fields to support our business strategy. We plan to continue to strengthen our culture of innovation, quality, and excellent customer service.

We have made the deliberate choice to vertically integrate our design, development, and manufacturing systems with the goal of allowing us to rapidly design and develop disruptive products, significantly shortening the time to bring new products to market. Our AMPs provide a prime example of this advantage. All of our research and development into automating the PATH machines, particularly our servo electric motion control technology, was transferable to our AMPs. We believe that our engineering expertise, vertically integrated production capabilities, and track record with critical piece part and subcomponent manufacturing positions us to successfully serve our customers who rely on us to deliver technical design and scaled manufacturing for integrated systems. As of September 30, 2025, we had an estimated combined total of over 770 PATH machines, AMPs and M220 machines in service throughout the world.

Our machine offerings consist of:

	●	PS155 C and PS160 Slab Harvesters. The PS155C is the basic slab harvester that we offer. The PS160 has electric conveyors (upper and pickup), which give very repeatable high speeds and smooth, accurate control. The PS160 also harvests grass 20% to 30% faster than the standard PS155C. Our electric systems reduce hydraulic oil temperature and improve fuel efficiency. The PS160 also comes with reconfigured gear ratios for higher transport speed and improved traction control when harvesting in slippery conditions.
	●	R300 Harvester. The R300 Harvester stacks the turf on pallets in mini rolls. The R300 Harvester now has a single, powerful computer to run both the machine and operator interface. From chop to stack, the R300 Harvester's systems are synchronized for the highest speeds and productivity. We believe that we have the only machine on the market that can pick up rolls from the accumulating conveyor while it is moving.
	●	AMP-L100 and AMP-X100. We offer two models of our AMPs: a 5-gang reel, model AMP-L100, and a 5 gang rotary, model AMP-X100. Both models are fully autonomous, all electric, 100-inch robotic mowers. Our AMPs' patented drive and steering system, which utilizes four induction motors, is synchronized with two independent steering motors to achieve a combination of traction and low impact to turf. Each wheel is commanded at precise velocity for any given input velocity and steering angle, providing consistent traction. The absence of a diesel engine and hydraulic pump allows the weight of the machine to be distributed for balance, responsive handling, and low turf impact.
	●	Used machines. From time to time, we will take trade-ins from existing and/or new customers and resell the used machines. The trade-ins are typically used machines previously sold by us, or our competitors' machines.

We purchase and fabricate parts for all of our machines, which are used both in our manufacturing process and in our service business.

Principal External Factors Affecting Our Operating Results

We believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled "Risk Factors".

	●	Market acceptance. The growth of our business depends on our ability to gain broader acceptance of our current products by continuing to make users aware of the significant benefits of our products so as to generate increased demand and frequency of use, and thus increase our sales. Our ability to grow our business will also depend on our ability to expand our customer base in existing or new target markets, including international markets. Although we have increased the number of users of our PATH machines and AMPs and continue to grow our channels globally through established relationships and focused sales efforts, we cannot provide assurance that our efforts will continue to increase the demand for and use of our products.
	●	Sales force size and effectiveness. The rate at which we grow our sales force and expansion channels and the speed at which newly hired salespeople and sales channels become effective can impact our revenue growth and our costs incurred in anticipation of such growth. We intend to continue to make significant investments in our sales and marketing organization and channels by increasing the number of sales representatives and expanding our international programs to help facilitate further adoption of our products as well as broaden awareness of our products to new customers.

	●	Product and geographic mix; timing. Our financial results, including our gross margins, may fluctuate from period to period based on the timing of orders, fluctuations in foreign currency exchange rates and the number of available selling days in a particular period, which can be impacted by a number of factors, such as holidays or days of severe inclement weather in a particular geography, the mix of products sold and the geographic mix of where products are sold. Our business is subject to some seasonality, as turf harvesters and golf courses primarily make equipment purchases in the spring. Given our international operations, periods of seasonality are, in some respects, offset between different temperate zones, including northern and southern hemispheres. In addition, in our experience, our country club and municipality customers typically establish operating budgets in the fourth quarter of each year, for the following year. As a result, purchases by such entities may be delayed until after such budgeting processes are completed.
	●	Declining housing starts, high interest rates and high construction costs. Housing starts directly impact the demand for turf in the U.S. and other countries. The higher the mortgage interest rates and construction costs, the fewer new homes built, which may result in decreasing the demand for turf for yards and neighborhood parks.

Principal Components of Revenues, Costs and Expenses

Revenues

Our revenues come substantially from the sale of PATH machines, AMPs, and used machines through our direct-to-consumer sales force. We also recognize revenue from the sale of purchased and fabricated parts, the shipping of machines and parts, the service and repair of machines, and, to a lesser extent, software subscriptions.

Cost of Revenues

Cost of revenues consists primarily of costs that are directly related to the manufacture and delivery of our machines, cost of parts purchased and fabricated, including direct material, labor, manufacturing overhead, reserves for estimated warranty costs and charges to write-down the inventory carrying value when it exceeds the estimated net realizable value.

Operating Expense

Selling, General and Administrative

Sales and marketing expenses consist primarily of advertising, training events, brand building, product marketing activities and commissions. We expect sales and marketing costs will continue to increase as we expand our international selling and marketing activities, hire additional personnel, and build brand awareness through advertising and training.

General and administrative expenses consist primarily of professional fees paid for legal, accounting, auditing, and consulting services, bad debt, licenses and association dues, facilities (including rent and utilities) bank and credit card processing fees and other expenses related to general and administrative activities.

Service expenses consist primarily of salaries, wages and benefits for the service and support technicians, travel and shipping expenses.

Included in selling, general and administrative expenses are salaries, wages and benefits which are allocated to the various departments in which the employees work. Salaries, wages and benefits are expenses earned by our employees in the executive, information technology, finance and accounting, human resources, administrative functions and outside contractors. Also included in salaries, wages and benefits are employer payroll taxes, health, and dental and expenses.

We anticipate that our general and administrative expenses will continue to increase as we continue hiring to support our growth. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, and investor and public relations expenses associated with operating as a public registrant.

Research and Development

Included in research and development expense are salaries, wages and benefits for our engineers and software developers. Also included in research and development expense are expenses for travel, training, and software licenses used in the development of our products.

Other Expenses and Income

Interest Income

Interest income relates to interest earned on our savings deposit account.

Interest Expense

Interest expense consists of interest expenses associated with issuing notes payable and balances outstanding under our debt obligations.

Change in Fair Value of Convertible Debentures

We record our convertible debentures at fair value at the time of issuance. We recognize any changes in fair value in subsequent reporting periods through the statements of operations.

Change in Fair Value of the Common Stock Purchase Warrant Liability

We record our warrant liability at fair value at the time of issuance. We recognize any changes in fair value in subsequent reporting periods through the statements of operations.

Other Income

Other income relates to the gain on assets disposed of during the year and other miscellaneous income items that are not significant.

Results of Operations

Comparisons of Three Month ended September 30, 2025 and 2024

The following table sets forth certain condensed statements of operations data for the periods indicated with dollars expressed in thousands. In addition, we note that period-to-period variations may not be indicative of future performance.

		Three Months Ended September 30,								Variation
		2025				2024				$				%
Revenues, net		$	12,889			$	8,875			$	4,014				45.23	%
Cost of revenues			9,852				7,223				2,629				36.40	%
Gross profit			3,037				1,652				1,385				83.84	%
Selling, general and administrative			3,532				2,708				824				30.43	%
Research and development			1,228				1,025				203				19.80	%
Operating expenses			4,760				3,733				1,027				27.51	%
Loss from operations			(1,723	)			(2,081	)			358				(17.20	)%
Change in fair value of convertible debentures			(1,139	)			(706	)			(433	)			61.33	%
Change in fair value of the common stock purchase warrant liability			39				(3,615	)			3,654				(101.08	)%
Net loss			(2,871	)			(6,444	)			3,573				(55.45	)%
Net loss income per common share		$	(0.19	)		$	(0.46	)		$	0.27				(58.70	)%

Revenues (in thousands, except number of machines sold)

		Three Months Ended September 30,
		2025				2024
Machines:
PATH machines		$	6,718			$	5,364
AMPs			2,728				841
Used			373				145
Parts			2,472				2,004
Shipping			439				390
Service			159				130
Other			-				1
		$	12,889			$	8,875

		Three Months Ended September 30,
		2025				2024
Number of Machines Sold:
PATH machines			18				15
AMPs			17				6
Used			2				4
			37				25

		Three Months Ended September 30,
		2025				2024
Average Sales Price:
PATH machines		$	373				358
AMPs			160				140
Used			187				36

Our revenues were $12,889 for the three months ended September 30, 2025, compared to $8,875 for the three months ended September 30, 2024, an increase of $4,014 or 45.23%. The increase in revenues was due primarily to a $1,887 increase in AMP revenues, a 1,354 increase in PATH machine sales, a $468 increase in parts revenues, a $49 increase in shipping revenues and a $29 increase is service revenues offset by a $1 decrease in other revenues.

We believe that sales of our PATH machines are directly correlated with prevailing mortgage interest rates and the number of housing starts. Beginning in 2022 and continuing into 2023, the Federal Reserve increased interest rates in an effort to reduce inflation. These actions contributed to higher mortgage interest rates and a corresponding decline in housing starts. We believe that the decline in housing starts has negatively impacted the demand for our PATH machines. Despite selling fewer PATH machines, the Company has raised the PATH price machine resulting in a $15 increase in the PATH's average sales price for the three months ending September 30, 2025.

Although the Federal Reserve reduced its benchmark interest rate beginning in September 2024 and continuing through September 2025, mortgage interest rates have remained elevated from previously low levels. Despite the decline in the benchmark interest rate, mortgage rates have remained relatively flat and elevated compared to levels prior to 2022. In addition, turf farmers have indicated their concern related to tariff, the government shutdown and the overall, unknown impact on the economy. As a result of this environment, we believe turf farms have delayed or cancelled purchases of our PATH machines. In 2023 and 2024, we sold 90 and 72 PATH machines, respectively. For the three months ended September 30, 2025 and 2024, we sold 18 and 15 PATH machines, respectively.

We began marketing and selling our AMP machines in early 2024 and hired additional AMP sales and support individuals in 2025 whose sole focus is marketing, selling, delivering and installing AMP machines. For the three months ended September 30, 2025 and 2024, we sold 17 and 6 AMPS, respectively. During the three months ended September 30, 2025, we hired two additional salespeople, who focus solely on the AMP sales. The additional focus on the AMP sales and increased demand, has resulted in an increases AMP's average sales price $140 to $160 during the three months ending September 30, 2025.

Also, in April 2025, a supplier of motors for our AMP notified us of a potential 90-day delay in their delivery. This resulted in us shipping fewer AMPs than anticipated in the second quarter. The supplier was able to ship motors starting in August 2025. We are in the process of finalizing a long-term supply contract with a different motor manufacturer. However, we anticipate that some supply constraints for motors could likely continue through the remainder of 2025, which could potentially negatively affect our ability to continue scaling production and delivery of our AMPs. As a result, we currently do not expect to experience the historical growth in our revenue from AMP sales over the remainder of 2025.

Used machines are generally turf harvesters that we acquire through purchases on the open market or accept as trade-ins from customers, including previously sold PATH machines. Sales of used machines fluctuate based on the timing of trade-ins and subsequent resales. These machines are typically purchased by small to mid-sized turf farms that cannot afford new harvesters, as well as by turf farms seeking a lower-cost backup machine. For the three months ended September 30, 2025 and 2024, we sold 2 and 4 used machines, respectively.

Parts and services revenues increased during the three months ended September 30, 2025, primarily due an increase in our parts sales prices, to growth in the installed base of PATH machines and AMPs, as well as enhanced marketing efforts, including outbound calls to customers who own our machines to encourage parts purchases directly from us rather than through third-party sellers. In addition, higher retail sales prices for parts contributed to the increase. As of September 30, 2025, we estimate that more than 790 PATH machines, AMPs, and M220 machines combined were in service worldwide.

The increase in shipping revenue is due primarily to shipping more AMP and PATH machines during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. PATH and some AMP machines are generally shipped via third-party carriers from our manufacturing facility in Salt Lake City, Utah.

The increase in service revenue is due primarily to the increase in the number of machines in operation, and in the number of service technicians along with implementing and teaching our training school session, where customers attend our specialized training session to learn how to better operate and maintain their owned machines.

Cost of Revenues

Cost of revenues for the three months ended September 30, 2025, increased $2,629 or 36.40% to $9,852 from $7,223 for the three months ended September 30, 2024. The total increase was due primarily to:

i.

Machine costs increased $2,226, primarily due to:

a.

A $1,773 increase related to the manufacture and sale of 11 more AMP and 3 more PATH machines, combined with higher purchased and fabricated costs resulting from price increases ($103 in tariffs), $134 in inventory write down and higher internal fabrication costs.

b.

A $158 increase in rent and facility operating costs and related repairs and depreciation.

c.

A $215 increase in compensation and related benefits from the additional of manufacturing (fabrication and assembly) time to produce the increased number of AMP and PATH machines sold during the three months ending September 30, 2025 and an increase in the stock based compensation expense as a result of the stock options issued in July 2025.

d.

An $80 increase in warranty expense reflecting a larger number of AMP and PATH machines sold (we accrue the estimated future warranty expense) and overall total machines in operation worldwide.

ii.

Used equipment costs increased $110, primarily due differences in the models of used machines sold during the current period.

iii.

Parts costs increased $193, primarily due to the higher $468 in higher parts sales volume, and some supplier price increases, and higher fabrication labor costs for replacement parts.

iv.

Shipping and service costs increased $100, respectively, primarily reflecting more PATH and AMP machines sold and shipped during the period.

Operating Expenses

Our operating expenses were $4,760 for the three months ended September 30, 2025, compared to $3,733 for the three months ended September 30, 2024, an increase of $1,027 or 27.51%. The increase is in line with our strategic plan to grow and expand our product mix in order to be competitive with the AgTech and sports turf leaders and was due primarily to:

i.

Sales and marketing expenses increased $281, primarily due to a $282 increase in salaries, wages, and benefits resulting from the addition of sales associates and marketing support staff and an increase in the stock based compensation expense as a result of the stock options issued in July 2025, a $17 increase in conference and tradeshow costs, a $3 increase in advertising and media purchases, offset by a $5 decrease in travel expenses and a $16 decrease in other miscellaneous expenses such as postage, software subscription fees, office supplies among others.

ii.

General and administrative expenses increased $290, as a result of $448 increase in salaries, wages and benefits associated with hiring additional accounting and administrative and support personnel and an increase in the stock based compensation expense as a result of the stock options issued in July 2025, a $22 increase in miscellaneous office expenses such as office supplies, postage, and software subscription fees office, a $14 increase in corporate insurance, all offset by a $166 decrease in facility and maintenance costs, a $23 decrease in professional fees, and a $5 decrease in travel expense.

iii.

Service expenses increased $210, primarily due to $144 increase in salaries, wage and benefits including an increase in the stock based compensation expense as a result of the stock options issued in July 2025, a $48 increase in travel expenses, a $14 increase in office expenses such as voice and data communications expenses and a $4 increase in shipping costs from shipping parts from the main warehouse to the service technician's location.

iv.

Research and development expenses increased $203 primarily due to $92 increase in salaries, wage and benefits including an increase in the stock based compensation expense as a result of the stock options issued in July 2025, $118 increase in purchased parts and materials to be used in development of AMP improvements, a $6 increase in facilities and maintenance expenses associated with the AMP testing field, a $7 increase in legal fees related to patent application and maintenance filings, offset by a $10 decrease in travel expenses, a $10 decrease in voice an data communication costs.

Interest Income

Our interest income was $9 for the three months ended September 30, 2025 compared to $5 for the three months ended September 30, 2024, an increase of $4 or 80.0%. The increase in interest income resulted from timing of deposits and higher average savings account balances in 2025.

Interest Expense

Our interest expense was $42 for the three months ended September 30, 2025, compared to $50 for the three months ended September 30, 2024, a decrease of $8, or 16.00%. The decrease was due to the timing of amortization of notes payable fees, notes payable repayments and certain notes maturing.

Change in Fair Value of Convertible Debentures

The change in fair value of convertible debentures was negative $1,139 for the three months ended September 30, 2025, compared to a negative $706 for the three months ended September 30, 2024, representing a decrease in expense of $433, or 61.33%. We record our convertible debentures at fair value upon issuance, with subsequent changes in fair value recognized in the statement of operations for each reporting period. The change in fair value for the three months ended September 30, 2025 primarily reflects updated valuations of all convertible debentures outstanding as of that date, incorporating current market conditions and revised assumptions. These fair value adjustments are non-cash in nature but may cause significant volatility in our reported results of operations.

Change in Fair Value of the Common Stock Purchase Warrant Liability

The change in fair value of the common stock purchase warrant liability was $39 for the three months ended September 30, 2025, compared to a negative $3,615 for the three months ended September 30, 2024, representing an increase of $3,654 or (101.08%. We record common stock purchase warrant liabilities at fair value upon issuance, with subsequent changes in fair value recognized in the statement of operations for each reporting period. The change in fair value for the three months ended September 30, 2025 primarily reflects updated valuations of all common stock purchase warrants outstanding as of that date, incorporating current market conditions and revised assumptions. These fair value adjustments are non-cash in nature but may cause significant volatility in our reported results of operations.

Other Income

Other income for the three months ended September 30, 2025 was zero, compared to $4 for the three months ended September 30, 2024, representing a decrease of $4 or 100.00%. The prior year amount primarily reflects miscellaneous income items that were not significant in nature.

Other Expense

Our other expense was $15 for the three months ended September 30, 2025 compared to $1 for the three months ended September 30, 2024, a change of $14 or 1,400.00%. The expense relates primarily to state franchise taxes and other miscellaneous adjustments.

Comparisons of Nine Months ended September 30, 2025 and 2024

The following table sets forth certain condensed statements of operations data for the periods indicated with dollars expressed in thousands. In addition, we note that period-to-period variations may not be indicative of future performance.

		Nine Months Ended September 30,								Variation
		2025				2024				$				%
Revenues, net		$	35,798			$	30,417			$	5,381				17.69	%
Cost of revenues			28,924				22,912				6,012				26.24	%
Gross profit			6,874				7,505				(631	)			(8.41	)%
Selling, general and administrative			9,715				7,487				2,228				29.76	%
Research and development			3,459				3,118				341				10.94	%
Operating expenses			13,174				10,605				2,569				24.22	%
Loss from operations			(6,300	)			(3,100	)			(3,200	)			103.23	%
Change in fair value of convertible debentures			(1,618	)			(2,275	)			657				(28.88	)%
Change in fair value of the common stock purchase warrant liability			(904	)			(3,584	)			2,680				(74.78	)%
Net loss			(8,954	)			(9,151	)			197				(2.15	)%
Net loss income per common share		$	(0.61	)		$	(0.68	)		$	0.07				(10.29	)%

Revenues (in thousands, except number of machines sold)

		Nine Months Ended September 30,
		2025				2024
Machines:
PATH machines		$	18,672			$	18,918
AMPs			6,301				1,475
Used			1,748				1,926
Parts			7,141				6,140
Shipping			1,328				1,355
Service			548				503
Other			60				100
		$	35,798				30,417

		Nine Months Ended September 30,
		2025				2024
Number of Machines Sold:
PATH machines			50				55
AMPs			42				10
Used			16				21
			108				86

		Nine Months Ended September 30,
		2025				2024
Average Sales Price:
PATH machines		$	373				344
AMPs			150				148
Used			109				92

Our revenues were $35,798 for the nine months ended September 30, 2025, compared to $30,417 for the nine months ended September 30, 2024, an increase of $5,381 or 17.69%. The increase in revenues was due primarily to a $4,826 increase in AMP revenues, a $1,001 increase in parts revenues, a $45 increase in service revenues offset by a $247 decrease in PATH machine sales, a $178 decrease in used equipment sales and a $66 decrease in shipping and other revenues.

We believe that sales of our PATH machines are directly correlated with prevailing mortgage interest rates and the number of housing starts. Beginning in 2022 and continuing into 2023, the Federal Reserve increased interest rates in an effort to reduce inflation. These actions contributed to higher mortgage interest rates and a corresponding decline in housing starts. We believe that the decline in housing starts adversely impacted demand for our PATH machines.

Although the Federal Reserve reduced its benchmark interest rate beginning in September 2024 and continuing through December 2024, mortgage interest rates remain elevated from previously low levels. Mortgage rates have remained relatively flat and elevated compared to levels prior to 2022. In addition, turf farmers have indicated their concern related to tariffs and the overall, unknown impact on the economy. As a result of this environment, we believe turf farms have delayed or canceled purchases of our PATH machines. In 2023 and 2024, we sold 90 and 72 PATH machines, respectively. For the nine months ended September 30, 2025 and 2024, we sold 50 and 55 PATH machines, respectively.

We began marketing and selling our AMP machines in early 2024 and hired additional AMP sales and support individuals in 2025 whose sole focus is marketing, selling, delivering and installing AMP machines. For the nine months ended September 30, 2025 and 2024, we sold 42 and 10 AMPs, respectively. In April 2025, a supplier of motors for our AMP notified us of a potential 90-day delay in their delivery. This resulted in us shipping fewer AMPs than anticipated in the second quarter. The supplier was able to ship motors starting in August 2025. We are in the process of finalizing a long-term supply contract with a different motor manufacturer. However, we anticipate that some supply constraints for motors could continue through the remainder of 2025, which could potentially negatively affect our ability to continue scaling production and delivery of our AMPs. As a result, we currently do not expect to experience the historical growth in our revenue from AMP sales over the remainder of 2025.

Used machines are generally turf harvesters that we acquire through purchases on the open market or accept as trade-ins from customers, including previously sold PATH machines. Sales of used machines fluctuate based on the timing of trade-ins and subsequent resales. These machines are typically purchased by small to mid-sized turf farms that cannot afford new harvesters, as well as by turf farms seeking a lower-cost backup machine. For the nine months ended September 30, 2025 and 2024, we sold 16 and 21 used machines, respectively.

Parts and services revenues increased during the nine months ended September 30, 2025, primarily due to growth in the installed base of PATH machines and AMPs, as well as enhanced marketing efforts, including outbound calls to customers who own our machines to encourage parts purchases directly from us rather than through third-party sellers. In addition, higher retail sales prices for parts contributed to the increase. As of September 30, 2025, we estimate that more than 790 PATH machines, AMPs, and M220 machines combined were in service worldwide.

The decrease in shipping revenue is due primarily to shipping eight fewer PATH machines during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. PATH machines are generally shipped via third-party carriers from our manufacturing facility in Salt Lake City, Utah.

The increase in service revenue is due primarily to the increase in the number of machines in operation, and in the number of service technicians along with implementing and teaching our training school session, where customers attend our specialized training session to learn how to better operate and maintain their owned machines.

Cost of Revenues

Cost of revenues for the nine months ended September 30, 2025, increased $6,012 or 26.24% to $28,924 from $22,912 for the nine months ended September 30, 2024. The total increase was due primarily to:

i.

Machine costs increased $5,558, primarily due to:

	a.	A $4,505 increase related to the manufacture and sale of 32 more AMPs, combined with higher purchased and fabricated parts costs resulting from supplier price increases (including $153 in tariffs) and higher internal fabrication labor costs.
	b.	A $240 increase in rent and facility operating costs and related repairs and depreciation.
	c.	A $606 increase in compensation and related benefits from the addition of manufacturing employees to support the AMP production line.
	d.	A $207 increase in warranty expense, reflecting a larger number of AMPs sold and overall total machines in operation worldwide.

	ii.	Used equipment costs decreased $44, primarily due to selling five fewer used machines and differences in the models of used machines sold.
	iii.	Parts costs increased $553, primarily due to higher parts sales volume ($1,001), supplier price increases, and higher fabrication labor costs for replacement parts.
	iv.	Shipping and service costs decreased $51 and $4 respectively, primarily reflecting fewer PATH machines shipped during the period.

Operating Expenses

Our operating expenses were $13,174 for the nine months ended September 30, 2025, compared to $10,605 for the nine months ended September 30, 2024, an increase of $2,569 or 24.22%. The increase is in line with our strategic plan to grow and expand our product mix in order to be competitive with the AgTech and sports turf leaders and was due primarily to:

	i.	Sales and marketing expenses increased $657, primarily due to a $485 increase in salaries, wages, and benefits resulting from the addition of sales associates and sales and marketing support staff, a $49 increase in travel expenses related to AMP demonstrations across the United States and attendance at trade show conferences, an $84 increase in trade show registration fees and a $39 increase in other miscellaneous expenses such as postage, software subscription fees, office supplies among others.
	ii.	General and administrative expenses increased $1,243, reflecting a $713 increase in salaries, wages, and benefits associated with hiring additional accounting and administrative personnel, a $381 increase in professional fees primarily related to annual audit costs (preparing us to take advantage of a potential financing transaction in the public markets), a $32 increase in corporate insurance, a $117 increase in depreciation and amortization and a $20 decrease in travel and miscellaneous office expenses.
	iii.	Service expenses increased $328, primarily due to a $180 increase in salaries, wages, and benefits related to hiring additional service technicians to support AMP machines, a $138 increase in travel expenses related to the service technicians traveling to customer locations, and a $10 increase in miscellaneous service expenses, including office supplies, vehicle repair and maintenance, and shipping.
	iv.	Research and development expenses increased $341, primarily due to a $138 increase in AMP mower parts used in developing and testing upgrades to the AMP, a $109 increase in salaries, wages, and benefits due primarily to increased labor to support the AMP roll out, a $47 increase in project costs, a $57 increase in software support, a $37 increase in professional fees related primarily to patent maintenance, and a $47 decrease in travel and other miscellaneous office expenses.

Interest Income

Our interest income was $27 for the nine months ended September 30, 2025 compared to $20 for the nine months ended September 30, 2024, an increase of $7 or 35.0%. The increase in interest income resulted from timing of deposits and higher average savings account balances in 2025.

Interest Expense

Our interest expense was $90 for the nine months ended September 30, 2025, compared to $171 for the nine months ended September 30, 2024, a decrease of $81, or 47.37%. The decrease was due to the timing of amortization of notes payable fees, notes payable repayments and certain notes maturing.

Change in Fair Value of Convertible Debentures

The change in fair value of convertible debentures was negative $1,618 for the nine months ended September 30, 2025, compared to negative $2,275 for the nine months ended September 30, 2024, representing a decrease in expense of $657, or (28.88%). We record our convertible debentures at fair value upon issuance, with subsequent changes in fair value recognized in the statement of operations for each reporting period. The change in fair value for the nine months ended September 30, 2025 primarily reflects updated valuations of all convertible debentures outstanding as of that date, incorporating current market conditions and revised assumptions. These fair value adjustments are non-cash in nature but may cause significant volatility in our reported results of operations.

Change in Fair Value of the Common Stock Purchase Warrant Liability

The change in fair value of the common stock purchase warrant liability was negative $904 for the nine months ended September 30, 2025, compared to negative $3,584 for the nine months ended September 30, 2024, representing a decrease of $2,680 or 74.78%. We record common stock purchase warrant liabilities at fair value upon issuance, with subsequent changes in fair value recognized in the statement of operations for each reporting period. The change in fair value for the nine months ended September 30, 2025 primarily reflects updated valuations of all common stock purchase warrants outstanding as of that date, incorporating current market conditions and revised assumptions. These fair value adjustments are non-cash in nature but may cause significant volatility in our reported results of operations.

Other Income

Other income for the nine months ended September 30, 2025 was $16, compared to $4 for the nine months ended September 30, 2024, representing an increase of $12 or 300.00%. The current year amount primarily reflects miscellaneous income items that were not significant in nature.

Other Expense

Our other expense was $85 for the nine months ended September 30, 2025 compared to $45 for the nine months ended September 30, 2024, a change of $40 or 89.89%. The expense relates primarily to state franchise taxes and other miscellaneous adjustments.

Liquidity and Capital Resources

Historically, we funded our operations through the reinvestment of free cash flows generated from our business operations, issuance of common stock to private friend and family investors, borrowings from term loans, and issuance of convertible debentures.

As of September 30, 2025, we had $2,421 in cash and $2 in current working capital (representing total current assets minus total current liabilities), respectively compared to $2,587 in cash and restricted cash and $3,602 in current working capital as of December 31, 2024. As of December 31, 2024, restricted cash represents a $300 irrevocable standby letter in favor of a bank that was financing a machine purchase for one of our customers. The standby letter of credit was released in March 2025.

In July 2024, we entered into a $1,000 convertible debenture agreement with an annual interest rate of 15.0% per annum and maturing on January 31, 2028. The convertible debenture provides for an additional $1,000 borrowing at our option and based on certain requirements. In June 2025, we borrowed the additional $1,000 under such debenture. In connection with the additional borrowing, we issued warrants to purchase 181,861 shares of our common stock. The additional $1,000 borrowed in June 2025 will mature on January 31, 2028. Each of these convertible debentures will automatically convert into shares of our common stock at a conversion price equal to the lesser of (i) $5.5674 per share and (ii) 85% of the initial public offering price per share, subject to certain adjustments, including for subsequent equity sales at a lower price per share.

In July 2025, we issued an unsecured convertible note to an investor in the principal amount of $100. The convertible note has a term of two years and bears interest at a rate of 15% per annum. The note will automatically convert into shares of common stock upon the closing of an underwritten public offering of common stock that raises at least $10,000 of gross proceeds, at a conversion price equal to the lesser of (i) $5.5674 per share or (ii) 90% of the initial public offering price per share. The principal and accrued interest on the convertible note are due at maturity.

In August 2025, we issued four unsecured convertible notes to three investors in the aggregate principal amount of $220. Each convertible note has a term of two years and bears interest at a rate of 15% per annum. The notes will automatically convert into shares of common stock upon the closing of an underwritten public offering of common stock that raises at least $10,000 of gross proceeds, at a conversion price equal to the lesser of (i) $5.5674 per share or (ii) 90% of the initial public offering price per share. The principal and accrued interest on the convertible notes are due at maturity.

Our outstanding convertible debentures include customary covenants and events of default, including, but not limited, a covenant to maintain minimum operating cash flow of at least negative $650 during any three consecutive months. Historically, we have not been able to comply with such minimum cash flow covenants and may not be able to comply in the future. Additionally without the holders' approval, we previously amended and restated our Certificate of Incorporation to increase the number of authorized shares of common stock and amended our 2016 Stock Plan to increase the number of shares available for future grant from 5,000,000 to 7,235,215. While the holders waived such breaches, including our noncompliance with the minimum operating cash flow covenant, in March 2025, there can be no guarantee that the holders will continue to provide such waivers if we continue to fail to meet such minimum cash flow covenants, or other covenants under the Debentures. If we are in default under the Debentures and the holders declare the outstanding balances immediately due and payable, we may not have sufficient funds to satisfy such obligations and may need to seek additional waivers or pursue a reorganization proceeding under applicable bankruptcy or insolvency laws. In the event we need to seek additional waivers, the holders of the Debentures may require us to provide consideration for such waivers, including, but not limited to, issuing additional warrants or amending the terms of the Debentures to be more favorable to the holders. As a result of the waivers received, we were in compliance with the covenants under our Debentures as of September 30, 2025.

In December 2025, we entered into a $1,000 convertible debenture agreement with an annual interest rate of 15.0% per annum and maturing on January 31, 2028. In connection with the additional borrowing, we issued warrants to purchase 181,861 shares of our common stock at $0.01. The convertible debenture will automatically convert into shares of our common stock at a conversion price equal to the lesser of (i) $5.5674 per share and (ii) 85% of the initial public offering price per share, subject to certain adjustments, including for subsequent equity sales at a lower price per share.

In February 2026, we entered into a $2,000 convertible debenture agreement with an annual interest rate of 15.0% per annum and maturing on January 31, 2028. In connection with the additional borrowing, we issued warrants to purchase 181,861 shares of our common stock at $0.01. The convertible debenture will automatically convert into shares of our common stock at a conversion price equal to the lesser of (i) $5.5674 per share and (ii) 85% of the initial public offering price per share, subject to certain adjustments, including for subsequent equity sales at a lower price per share.

Cash Flows

Comparisons of Nine Months ended September 30, 2025 and 2024

		Nine Months Ended September 30,
		2025				2024
Net cash (used in) provided by:
Operating activities			(1,279	)			(2,560	)
Investing activities			(354	)			(221	)
Financing activities			1,467				1,479
		$	(166	)		$	(1,302	)