Edible Garden AG Inc: Form 10-Q for the period ended Sep 30, 2025

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which provides a “safe harbor” for forward-looking statements made by us. All statements, other than statements of historical facts, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends, and other information, may be forward-looking statements. Words such as “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “might,” “plan,” “potential,” “should,” “will,” “would,” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs, estimates, and projections will occur or can be achieved. Actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including:

• our history of losses and our ability to continue as a going concern;
• our ability to obtain additional financing to fund our operations;
• our ability to maintain the listing of our common stock on the Nasdaq Stock Market LLC (“Nasdaq”) and comply with Nasdaq’s listing standards;
• the departure of members of our management team;
• our market opportunity;
• our ability to effectively manage our growth;
• our ability to complete and integrate business acquisitions;
• the effects of increased competition as well as innovations by new and existing competitors in our market;
• our ability to retain our existing customers and to increase our customer base;
• the future growth of the indoor agriculture industry and demands of our customers;
• our ability to maintain, or strengthen awareness of, our brand;
• our ability to expand the product lines we offer;
• our ability to maintain, protect, and enhance our intellectual property;
• future revenue, hiring plans, expenses and capital expenditures;
• our ability to pay our debts as they come due;
• our ability to comply with new or modified laws and regulations that currently apply or become applicable to our business;
• our ability to recruit and retain key employees and management personnel;
• our financial performance and capital requirements; and
• the potential lack of liquidity and trading of our securities.

The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this report and our other reports filed with the Securities and Exchange Commission (“SEC”).

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OVERVIEW

We are a controlled environment agriculture (“CEA”) farming company. We use traditional agricultural growing techniques together with technology to grow fresh, organic food, sustainably and safely while improving traceability. We use the controlled environment of traditional greenhouse structures, such as glass greenhouses, together with hydroponic and vertical greenhouses to sustainably grow organic herbs. In our hydroponic greenhouse, we grow plants without soil. Instead of planting one row of plants in the ground, by using vertical growing systems, we can grow many towers of herbs in the same area by planting up instead of planting across. Growing these products sustainably means that we avoid depleting natural resources in order to maintain an ecological balance, such as by renewing, reusing and recycling materials in order to lower the overall one-time use of materials.

Our controlled greenhouse facilities allow us to grow consistent quality herbs year-round, first by eliminating some of the variability of outdoor farming with our CEA techniques, and second by leveraging our proprietary software, GreenThumb. In addition to using hydroponic and vertical greenhouse systems, we use a “closed loop” system in our greenhouses. Generally, in a “closed loop” system, drain water is recollected and reused for irrigation. In our closed loop system, we also cycle water back into the system that has been collected through reverse osmosis. When compared with conventional agriculture, our closed looped systems and hydroponic methods use less land, less energy and less water (than legacy farms), thus conserving some of the planet’s limited natural resources. Our advanced systems are also designed to help mitigate contamination from harmful pathogens, including salmonella, e-coli and others.

We have also developed patented software called GreenThumb that assists in tracking plants through our supply chain. Utilizing our GreenThumb software to track the status of our plants as they grow and move throughout the greenhouse allows us to add a layer of quality control due to the frequent monitoring of the growing process, leading to improved traceability. In this context, traceability means being able to track a plant through all stages of production and distribution. In addition to improving traceability, GreenThumb helps us better manage the day-to-day operations of our business. GreenThumb is a web-based greenhouse management and demand planning system that does the following:

• integrates in real-time with our cloud business software suite for monitoring daily sales data;
• generates reports by category, product, customer, and farm to allow us to analyze sales, trends, margins and retail shrink (spoiled product);
• provides dynamic pallet mapping for packout, which enables us to more efficiently ship our products;
• utilizes a proprietary algorithm that uses year-over-year and trending sales data to develop customer specific and aggregate product specific forecasting for our greenhouses;
• aggregates all greenhouse activity input to provide real-time inventory and availability reports of all products in our greenhouses;
• manages our online ordering system with user controlled product availability based upon greenhouse inventory;
• provides a route management system for coordinating the logistics of our direct store delivery program; and
• tracks all production activities at greenhouses, including sowing, spacing, dumping, spraying, picking and packing, using hand held devices.

We also use our GreenThumb software to help monitor the quality of our products, and we have dedicated quality assurance and quality control personnel that check and monitor our products. We have customer service personnel that answer any questions the consumers of our products may have, and we regularly ask for feedback from our customers on the quality of our products. The combination of the GreenThumb software, quality assurance and control processes (including compliance with food safety standards), and feedback from consumers and purchasers holds us accountable for maintaining the quality of our products.

We focus our efforts on producing our herbs and vegetables in a sustainable manner that will reduce consumption of natural resources, by recycling water in our closed loop system and using LED lights instead of conventional lightbulbs to accelerate crop growth and yield, when necessary. In addition, the inventory management component of GreenThumb allows us to manage inventory levels, order quantities and fill rates while maximizing truck loads. This means that we are better able to control shipping our products in full truck loads and retailer backhaul programs, thus eliminating multiple deliveries and decreasing the excess emission of greenhouse gases that would result from many partially full trucks delivering our products. Together, these elements of our production and distribution process are intended to reduce our carbon footprint, or the total amount of greenhouse gases that are generated by our actions, as compared with a legacy farm business.

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We believe our focus on our brand “Edible Garden” is a significant differentiator. The brand not only lends itself to our current portfolio of products but allows us to develop other products in the “Consumer Brands” category. Our focus on sustainability, traceability, and social contribution, which we define as an ongoing effort to improve employee relations, working conditions, and local communities, presents our value proposition to our customers and supermarket partners and distributors. We have recently leveraged our brand recognition to offer more consumer products that are in many cases co-manufactured, such as sauces, fermented products and flavor enhancers.

RECENT DEVELOPMENTS

Avondale Secured Promissory Note

On August 29, 2025, we entered into a secured promissory note with Avondale Capital LLC (“Avondale”) pursuant to which we received $1,750,000 less an original issue discount of $350,000 and less $5,000 of fees and expenses, for net funds provided of $1,395,000. Pursuant to the Agreement, we are required to pay Avondale $43,750 weekly until the $1,750,000 secured promissory note with Avondale is paid in full. A portion of the net proceeds of the Avondale secured promissory note were used to satisfy the remaining amount to which Arin Funding LLC (“Arin”) was entitled under the standard merchant cash advance agreement we entered into with Arin on April 2, 2025 (the “Arin II Agreement”), which resulted in us recognizing a loss on extinguishment of $99,000.

October 2025 Warrant Inducement

On October 16, 2025, we entered into an inducement letter agreement (the “October Inducement Letter Agreement”) with an institutional investor and holder of existing warrants to purchase up to 2,021,571 shares of our common stock. The existing warrants were originally issued in May 2022, September 2023, and September and December 2024, with an exercise prices ranging from $75,000.00 to $3.50 per share, and became exercisable immediately following issuance. Pursuant to the October Inducement Letter Agreement, the holder agreed to exercise the existing warrants for cash at the exercise price of $2.06 per share in consideration for our agreement to issue a new unregistered warrant to purchase up to an aggregate of 4,043,142 shares of common stock at an exercise price of $2.06 per share. The new warrant was immediately exercisable upon issuance and has a term of five years from the issuance date.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the unaudited consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management’s estimates are based on historical experience, the relevant information available at the end of each period, and their judgment. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could differ materially from these estimates under different assumptions or market conditions.

The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our condensed consolidated financial statements and to the understanding of our reported financial results include the following.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We do not offer returns, discounts, loyalty programs or other sales incentive programs that are material to revenue recognition. Payments from our customers are due upon delivery or within a short period after delivery.

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Property, Equipment, and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Our fixed assets, which are comprised of leasehold improvements, equipment and vehicles, have useful lives of five years.

Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. We continually monitor events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. See Note 5, “Property, Equipment and Leasehold Improvements, Net” for further information.

Acquisition

The Company evaluates acquisitions to first determine whether a set of assets acquired constitutes a business and should be accounted for as a business combination. If the assets acquired are not a business, the transaction is accounted for as an asset acquisition in accordance with ASC 805-50, “Asset Acquisitions” which requires the acquiring entity to recognize assets acquired based on the cost to the acquiring entity on a relative fair value based on third-party appraisals. Goodwill is not recognized in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values. The significant assets acquired include equipment and right-of-use lease assets.

When acquiring leases in an asset acquisition, we retain the lease classification utilized by the seller if it was determined using acceptable methods under ASC 842 “Lease Accounting.” As part of the allocation of the purchase price, lease terms are compared to market terms utilizing an income approach to determine if leases are favorable or unfavorable. Any favorable or unfavorable leasehold interests identified increase (favorable) or reduce (unfavorable) the right-of-use lease asset and are recognized over the life of the related right-of-use asset.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes.” We file a consolidated United States federal income tax return. We provide for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We incurred net operating losses for financial-reporting and tax-reporting purposes. At September 30, 2025 and December 31, 2024, such net operating losses were offset entirely by a valuation allowance.

We recognize uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

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RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(In thousands)

Revenue

Revenue was $2.8 million for the three months ended September 30, 2025, compared to $2.6 million for the three months ended September 30, 2024. The increase in revenue of $0.2 million, or 9%, was primarily attributed to strong performance across the company’s shelf-stable product lines including Kick.Sports Nutrition, Vitamin Whey, Pulp and Pickle Party. We believe the drag on revenue from our strategic exit from the floral and lettuce categories, is now behind us, and this quarter represents the strength of our repositioned portfolio.

Cost of goods sold

Cost of goods sold were $2.5 million for the three months ended September 30, 2025, compared to $1.9 million for the three months ended September 30, 2024. Cost of goods sold increased $0.7 million, or 37%. As a percentage of revenue, gross profit decreased to 10% from 27% for the three months ended September 30, 2025. The increase in cost of goods sold was primarily driven by increased greenhouse labor and freight costs of $433 thousand and increased purchases of raw materials related to our nutraceutical products, inclusive of late Q2 invoices received from a supplier in the amount of $135 thousand. We are pursuing price adjustments to mitigate the impact of these inflationary pressures on cost of goods sold.

Selling, general and administrative

Selling, general and administrative expenses (“SG&A”) were $3.8 million for the three months ended September 30, 2025, compared to $2.2 million for the three months ended September 30, 2024. SG&A increased $1.6 million, or 73%. The increase was primarily driven by higher depreciation expense related to the assets purchased from Natural Shrimp and associated right of use, legal, audit and accounting expenses.

Loss from operations

Loss from operations were $3.6 million for the three months ended September 30, 2025, compared to $1.5 million for the three months ended September 30, 2024. The increase in the loss from operations was driven by lower gross margin and higher SG&A expenses as previously described above.

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Interest expense

Interest expense was $0.4 million for the three months ended September 30, 2025, compared to $0.4 million for the three months ended September 30, 2024. Interest expense was approximately unchanged as a result of similar borrowing amounts and amortization of debt issuance costs.

Net loss

Net loss was $4.0 million for the three months ended September 30, 2025, compared to a net loss of $2.1 million for the three months ended September 30, 2024. The reasons for the increase in net loss are explained above.

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(In thousands)

Revenue

Revenue was $8.7 million for the nine months ended September 30, 2025, compared to $10.0 million for the nine months ended September 30, 2024. The decrease in revenue of $1.3 million, or 13%, is primarily attributed to our strategic exit from the floral and lettuce categories, which contributed $1.1 million of the decline year over year.

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Cost of goods sold

Cost of goods sold were $7.7 million for the nine months ended September 30, 2025, compared to $7.7 million for the nine months ended September 30, 2024. Cost of goods sold was approximately the same for the two periods. As a percentage of revenue, gross profit decreased to 11% from 23% for the nine months ended September 30, 2025. The decrease was driven by inflationary pressures and higher labor costs related to production. We are working to mitigate cost pressures, assessing price adjustments and supplier negotiations where market conditions permit.

Selling, general and administrative

Selling, general and administrative expenses were $11.1 million for the nine months ended September 30, 2025, compared to $8.8 million for the nine months ended September 30, 2024. SG&A increased $2.3 million, or 26%. The increase was driven by transaction, professional and depreciation expenses related to the NaturalShrimp asset purchase, offset by the termination of severance payments related to the departure of the Company’s Chief Financial Officer in 2024.

Loss from operations

Loss from operations were $10.1 million for the nine months ended September 30, 2025, compared to $6.5 million for the nine months ended September 30, 2024. The increase in the loss from operations was driven by lower gross margin and higher SG&A expenses as previously described above.

Interest expense

Interest expense was $1.2 million for the nine months ended September 30, 2025, compared to $0.9 million for the nine months ended September 30, 2024. The increase was driven primarily by higher amortization of debt discount.

Net loss

Net loss was $11.4 million for the nine months ended September 30, 2025, compared to a net loss of $8.0 million for the nine months ended September 30, 2024. The reasons for the increase in net loss are explained above

LIQUIDITY AND CAPITAL RESOURCES

Going Concern Considerations

We have incurred significant losses since our inception. We recognized net losses of approximately $11.4 million during the nine months ended September 30, 2025 and $11.1 million during the twelve months ended December 31, 2024. We expect our capital expenses and operational expenses to increase in the future due to expected increased sales and marketing expenses, operational costs, and general and administrative costs. Therefore, we believe our operating losses will continue or even increase at least through the near term.

The risks and uncertainties surrounding our ability to continue our business with limited capital resources raises substantial doubt as to our ability to continue as a going concern for twelve months from the issuance of these financial statements. To date, we have financed our operations with the proceeds from debt financings, public and private securities offerings, and operations, among other sources. If we are unable to raise additional capital, we believe that our existing cash will fund operations into the second quarter of 2026 and will not be sufficient to fund our operations through the next twelve months beyond the date of the issuance of our consolidated financial statements. Our operations have consumed substantial amounts of cash since inception. The net cash used in operating activities was $9.1 million and $6.8 million during the nine months ended September 30, 2025 and 2024, respectively. Our consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business.

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There is no assurance that we will ever be profitable or that debt or equity financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all. The issuance of additional equity or equity-linked securities by us would result in significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business as planned and as a result may be required to scale back or cease operations, which could cause our stockholders to lose some or all of their investment in us. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.

Liquidity

The Company’s primary liquidity requirements are for working capital, continued investments in capital expenditures, repayment of indebtedness, payment of the preferred return to the holder of our Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), and other strategic investments. Although income taxes are not currently a significant use of funds, after the benefits of our net operating loss carryforwards are fully recognized, they could become a material use of funds, depending on our future profitability and future tax rates. The Company’s liquidity needs have been met primarily through public and private equity offerings, term loan borrowings, accounts receivable financing, convertible notes, and related party loans.

As of September 30, 2025 and December 31, 2024, we had $0.8 million and $3.5 million in cash and cash equivalents available, respectively. As of September 30, 2025 and December 31, 2024, we had $2.7 million and $3.2 million of total gross debt outstanding, respectively. During the nine months ended September 30, 2025, we used $9.1 million in cash for operating activities. As of September 30, 2025, we had a working capital deficit of $1.2 million, a decrease of approximately $2.4 million from a working capital surplus of $1.2 million as of December 31, 2024. To meet our cash needs, during the nine months ended September 30, 2025, we raised $3.3 million via the May warrant inducement, we raised $3.0 million from the sale of preferred stock, we entered into the Arin II Agreement and the Avondale secured promissory note, we raised approximately $2.3 million in an at-the-market offerings, and subsequent to September 30, 2025, we raised an additional $4.2 million via the October warrant inducement. We are also continuing to assess our cost structure for opportunities. See “Capital Resources” below for additional details.

We may not be able to access the capital markets in the future on commercially acceptable terms or at all. Our ability to fund future operating expenses and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance, which will be affected by general economic, financial and other factors beyond our control, including those described under “Risk Factors” in our Annual Report on Form 10-K, filed with the SEC on April 1, 2025.

Capital Resources

On October 16, 2025, we entered into the October Inducement Letter Agreement with an institutional investor and holder of existing warrants to purchase up to 2,021,571 shares of our common stock for total proceeds of $4.2 million before deducting Maxim Group LLC’s (“Maxim”) fees and other offering expenses payable by the Company. See Note 15 “Subsequent Events.”

On August 29, 2025, the Company entered into a secured promissory note with Avondale pursuant to which the Company received $1,750,000 less an original issue discount of $350,000 and less $5,000 of fees and expenses, for net funds provided of $1,395,000. Pursuant to the secured promissory note, the Company is required to pay Avondale $43,750 weekly until the $1,750,000 secured promissory note with Avondale is paid in full. A portion of the net proceeds of the Avondale secured promissory note were used to satisfy the remaining amount to which Arin was entitled under the Arin II Agreement.

On May 21, 2025, we entered into an inducement letter agreement (the “Inducement Letter Agreement”) with an institutional investor and holder of existing warrants to purchase up to 999,600 shares of our common stock for total proceeds of $2.999 million. Maxim received an aggregate cash fee equal to 6.5% of the $3.5 million in total proceeds received from the exercise of the Existing Warrants exercised in connection with the Inducement Letter Agreement. See Note 10 “Stockholders’ Equity (Deficit) And Stock-Based Compensation.”

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On May 14, 2025, we entered into a stock purchase agreement (the “SPA”) with Streeterville Capital LLC (“Streeterville”), pursuant to which we issued 3,000 shares of Series B Preferred Stock, at a stated value of $1,000 per share, to Streeterville, for the purchase price of $3.0 million. Additionally, pursuant to the SPA, Streeterville shall purchase an additional 500 shares of Series B Preferred Stock, at a stated value of $1,000 per share, on November 14, 2025.

On April 2, 2025, we entered into the Arin II Agreement with Arin, pursuant to which we agreed to sell $2.0 million of future accounts receivable to Arin in exchange for a purchase price of $1.5 million, less fees and expenses of $65 thousand, for net funds provided of $1.4 million. In connection with the Arin II Agreement, we negotiated with Cedar Advance LLC (“Cedar”) to discount the outstanding balance under the standard merchant cash advance agreement entered into with Cedar, dated as of December 4, 2024 (the “Cedar III Agreement”), from $1.4 million to $1.3 million, in exchange for us agreeing to prepay the future amounts payable under the Cedar III Agreement. A portion of the net proceeds of the Arin II Agreement were used to satisfy the remaining amount to which Cedar was entitled under the Cedar III Agreement. Weekly, we are required to pay Arin 20.0% of all funds collected from customers for the sale of goods and services and Arin is authorized to withdraw $63,750 of funds from our bank account until the total balance of $2.0 million is repaid.

On February 14, 2025, we entered into the Arin I Agreement with Arin, pursuant to which the Company sold to Arin $272 thousand of its future accounts receivable for a purchase price of $200 thousand, less fees and expenses of $10,000, for net funds provided of $190 thousand. Pursuant to the Arin I Agreement, the Company is required to pay Arin 10.0% of all funds collected weekly from customers and Arin is expected to withdraw $9,714 a week directly from the Company’s bank account until the $272 thousand due to Arin under the Arin I Agreement is paid in full.

On February 12, 2025, we advanced the Narayan d.o.o. and its subsidiaries (the “Narayan Group”) $193 thousand to support its operations and the Narayan Group issued a promissory note in favor of us in the principal amount of $190 thousand. On February 19, 2025, we agreed to advance Narayan Group an additional $199 thousand that was to be paid in weekly installments and the Narayan Group issued a promissory note in favor of us in the principal amount of $199 thousand (the “second promissory note”). On June 3, 2025, we announced the decision not to proceed with the transaction contemplated under the letter of intent to purchase outstanding shares of Narayan Group and negotiations ceased. Prior to our decision not to proceed with the transaction, we had advanced the Narayan Group $100 thousand under the second promissory note. The promissory notes accrued interest at a rate of 6.0% per annum until June 30, 2025, after which interest accrues at a rate of 10.0% per annum because the parties have not entered into a definitive agreement with respect to the proposed transaction. The Narayan Group is obligated to pay the outstanding principal and accrued interest in 12 equal monthly installments beginning on July 1, 2025. To date, the Narayan Group has not paid amounts due under the promissory notes and has defaulted on the repayment of the promissory notes.

On January 31, 2025, we entered into an Equity Distribution Agreement (the “2025 EDA”) with Maxim, as sales agent, pursuant to which the Company may, from time to time, issue and sell shares of its common stock through Maxim in an at-the-market offering for an aggregate offering price of up to $2.5 million. To date, we have received net proceeds of approximately $1.759 million from the sale of common stock under the 2025 EDA after deducting Maxim’s commission of 3.5% of the gross proceeds and other offering expenses.

For more information on our outstanding debt as of September 30, 2025 and December 31, 2024, see Note 8 “Notes Payable.”

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Cash Flows

Operating activities

During the nine months ended September 30, 2025 and 2024, cash used for operating activities was $9.1 million and $6.8 million, respectively. The increase in cash used for operating activities was primarily driven by the increase in net loss and the reduction in accounts payable, and an increase in prepaid expense and other current assets.

Investing activities

During the nine months ended September 30, 2025 and 2024, cash used in investing activities was $0.5 million and $0.2 million, respectively. The decrease in cash used in investing activities is attributable to lower normal course of business purchases of property, equipment and leasehold improvements.

Financing activities

During the nine months ended September 30, 2025 and 2024, cash provided by financing activities was $7.0 million and $8.6 million, respectively. The $1.6 million decrease in cash provided by financing activities was due to our repayment of outstanding debt and the lack of any public offerings of stock in 2025 as compared to 2024, offset by higher financing cash flows related to our May 2025 warrant inducement, the sale of $3.0 million of our preferred stock and higher cash flows from our 2025 equity distribution agreement.

Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025 pursuant to Rule 13a-15 under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Interim Chief Financial Officer have concluded that, as of September 30, 2025, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of September 30, 2025, at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should consider the risks described in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2024. Except as set forth below, there have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K. Any of these risks and uncertainties, including those discussed below, could materially and adversely affect our business, results of operations, financial condition, and/or the market price of our common stock. The risks described below and in our Annual Report on Form 10-K, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our financial condition and/or operating results.

There can be no assurance that our shares will continue to be listed on the Nasdaq Capital Market, which would affect our common stock’s liquidity and reduce our ability to raise capital.

On October 21, 2024, we received a letter from the Staff of Nasdaq indicating that, based on the closing bid price of our common stock for 30 consecutive business days, we no longer met the Bid Price Rule. Under Nasdaq Listing Rule 5810(c)(3)(A)(iv), because we effected reverse stock splits in the last two years with a cumulative ratio greater than 250 shares to 1, we were not eligible for any compliance period to regain compliance with the Bid Price Rule. On January 14, 2025, we attended our hearing with Nasdaq and on February 12, 2025, we received the Notice from Nasdaq that a Nasdaq Hearings Panel granted an extension for us to regain compliance with the Bid Price Rule until March 31, 2025, subject to additional conditions outlined in the Notice. On April 8, 2025, we received a letter from Nasdaq confirming that we had regained compliance with the Bid Price Rule, however we will remain under a Nasdaq discretionary panel monitor until April 8, 2026.

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According to the Nasdaq Listing Rules, under the Nasdaq discretionary panel monitor, if we fail to satisfy a continued listing requirement during the one-year monitoring period: (i) we will not be permitted to present a compliance plan to the Staff, (ii) the Staff will not be permitted to grant any additional time for us to regain compliance with the deficiency, (iii) we will not be afforded an applicable cure or compliance period pursuant to Nasdaq Listing Rule 5810(c)(3), and (iv) the Staff will promptly issue a delisting determination.

There can be no assurance that we will be able to maintain compliance with all applicable criteria for continued listing on Nasdaq. If our common stock is delisted, our warrants will also be delisted. We and holders of our securities could be materially adversely impacted if our securities are delisted from Nasdaq. In particular:

• we may be unable to raise equity capital on acceptable terms or at all;
• we may lose the confidence of our customers, which would jeopardize our ability to continue our business as currently conducted;
• the price of our common stock will likely decrease as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws;
• holders may be unable to sell or purchase our securities when they wish to do so;
• we may become subject to stockholder litigation;
• we may lose the interest of institutional investors in our common stock;
• we may lose media and analyst coverage;
• our common stock could be considered a “penny stock,” which would likely limit the level of trading activity in the secondary market for our common stock; and
• we would likely lose any active trading market for our common stock, as it may only be traded on one of the over-the-counter markets, if at all.