FIREFLY NEUROSCIENCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE1: BUSINESS DESCRIPTION

Overview

Firefly Neuroscience, Inc., a Delaware corporation, and its wholly owned subsidiaries Evoke Neuroscience, Inc., a Delaware corporation, Firefly Neuroscience2023, Inc., a Delaware corporation, Firefly Neuroscience Ltd., an Israeli corporation, Elminda2022 Inc., a Delaware corporation, Firefly Neurosciences Canada Inc., a Canadian corporation, and Elminda Canada Inc., a Canadian corporation (collectively, the “Company”), are engaged in the development, marketing and distribution of medical devices and technology allowing high resolution visualization and evaluation of the complex neuro-physiological interconnections of the human brain.

The combined entity operates under the name Firefly Neuroscience, Inc., and on* August 13, 2024,*the Company began trading on the Nasdaq Capital Market (NASDAQ Ticker Symbol: AIFF).

NOTE2: GOING CONCERN

As of* March 31, 2026*, the Company had an accumulated deficit of $113,619 and negative cash flow from operating activities for thethree months ended* March 31, 2026*, of $1,948. Further, the Company has recurring losses with insufficient revenue from operations and expects to continue generating losses and using cash for operations. The Company's cash requirements have been met through the sales of common stock, issuance of debt and warrant exercises. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Therefore, the Company* may*be unable to realize its assets and discharge its liabilities in the normal course of business.

Management of the Company has a reasonable expectation that the Company can continue raising additional capital to continue in operational existence for the foreseeable future. During thethree months ended* March 31, 2026,the Company raised $2,386 in gross proceeds through the initial closing of a private placement of units and the exercise of warrants (see Note13* - Equity). Subsequent to* March 31, 2026,the Company raised an additional $8,000 in gross proceeds through an additional closing of the same private placement and, on May 6, 2026,entered into a new securities purchase agreement for aggregate gross proceeds of up to $1,000, in each case as described in Note17* - Subsequent Events. The Company's ability to raise additional funds will depend on, among other factors, financial, economic and market conditions, many of which are outside of our control and there can beno assurance that the Company will be able to obtain additional funding on satisfactory terms or at all.

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NOTE3: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The results reported in these unaudited condensed consolidated financial statements shouldnot be regarded as necessarily indicative of results that* maybe expected for any subsequent period or for the entire period. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s annual audited consolidated financial statements for the year ended December 31, 2025*, and the notes thereto included in the Company’s Form10-K filed with the SEC on* March 31, 2026.*Certain information and footnote disclosures normally included in the audited consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in the accompanying unaudited condensed consolidated financial statements. All amounts are disclosed in thousands, except share and per share amounts. The accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, except as otherwise indicated, necessary for a fair statement of its consolidated financial position, results of operations, and cash flows of the Company for all periods presented.

Principles of consolidation

These unaudited consolidated financial statements include the financial information of the Company and its subsidiaries. The Company consolidates legal entities in which it holds a controlling financial interest. The Company has atwo-tier consolidation model:one focused on voting rights (the voting interest model) and thesecond focused on a qualitative analysis of power over significant activities and exposure to potentially significant losses or benefits (the variable interest model). All entities arefirst evaluated to determine whether they are variable interest entities (“VIE”). If an entity is determinednot to be a VIE, it is assessed on the basis of voting and other decision-making rights under the voting interest model. The accounts of the subsidiaries are prepared for the same reporting period using consistent accounting policies. All intercompany balances and transactions were eliminated on consolidation.

Use of estimates in the preparation of consolidated financial statements

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates and assumptions, and such differences could be material to the Company’s financial position and results of operations.

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Significant accounting policies

There have beenno new or material changes to the significant accounting policies discussed in the Company’s audited consolidated financial statements since the year ended* December 31, 2025*.

Impact of recently issued accounting standards

In* November 2024,the FASB issued ASU2024*-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses," which requires public business entities to disclose, in the notes to the financial statements, specified components of certain income statement expense line items presented on the face of the income statement, including purchases of inventory, employee compensation, depreciation, and amortization of intangible assets, on both an annual and interim basis. ASU2024-03 is effective for annual reporting periods beginning after* December 15, 2026,and interim reporting periods within fiscal years beginning after December 15, 2027,*with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its disclosures in the consolidated financial statements.

In* July 2025,the FASB issued ASU2025*-05, Financial Instruments - Credit Losses (Topic326) (“ASU2025-05”) to introduce a practical expedient to calculating current expected credit loss by assuming that the current conditions as of the balance sheet date willnot change for the remaining life of the asset. This expedient can only be applied to current accounts receivable and current contract assets. ASU2025-05 is effective for annual reporting periods beginning after* December 15, 2025and interim periods within those annual periods, and this update is applied prospectively. The adoption of this amendment didnot* have a material impact on the Company's consolidated financial statements.

In* September 2025,the FASB issued Account Standards Update, or ASU,2025-06 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic350* 40): Targeted Improvements to the Accounting for Internal-Use Software”, to modernize the accounting for internal-use software costs. The new guidance amends the existing standard that refers to various stages of a software development project to align better with current software development methods. Under the new guidance, entities will start capitalizing eligible costs when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. In evaluating whether it is probable the project will be completed, an entity is required to consider whether there is significant uncertainty associated with the development activities of the software. The new guidance will be effective for the Company for interim and annual periods beginning* January 1, 2028.The Company hasnot* adopted this standard early and is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements.

NOTE4: BUSINESS COMBINATION

Evoke Neuroscience, Inc.

On* April 30, 2025,the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Evoke Neuroscience, Inc. (“Evoke”) and stockholders of Evoke (the “Sellers”) to increase Firefly Neuroscience, Inc.’s capacity and expand its customer base. The Sellers sold and the Company purchased all of the issued and outstanding shares of Evoke, for a total purchase price consisting of: (i) $3,000 in cash (the “Cash Purchase Price”); (ii) shares of the Company’s common stock having an aggregate value of $3,000 priced at $3.50 per share (the “Shares”); and (iii) an earn-out payment in the form of additional shares of the Company’s common stock with an aggregate value of $500, contingent upon the achievement of specified revenue targets during athirty-six* (36) month earn-out period, all as further described in the Securities Purchase Agreement (the “Earn-Out Shares,” and collectively with the Cash Purchase Price and Share Consideration, the “Purchase Price”).

The contingent consideration associated with the Earn-Out Shares of $478 reflects the estimated fair value, at the acquisition date, of contingent future cash payments of up to $500 to the Sellers under an “earn-out” provision of the Securities Purchase Agreement. The Company determined the estimated acquisition date of fair value of the contingent consideration using a Monte Carlo simulation. Significant assumptions included a discount rate of 3.5% and an assumed income tax rate of 26.5% as well as projected net sales derived from internal forecasts and athree-month revenue volatility rate of 1.6%.

This contingent consideration of liability will be remeasured at fair value for each reporting period until the contingency is resolved, with changes in fair value recognized in operating expenses. During thethree months ended* March 31, 2026*, the Company didnot recognize a change in fair value of contingent consideration. Significant assumptions included a discount rate of 3.6% and an assumed income tax rate of 26.5% as well as projected net sales derived from internal forecasts and athree-month revenue volatility rate of 2.4%.

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The condensed consolidated financial statements of the Company include the results of operations of Evoke from* April 30, 2025to March 31, 2026* and donot include results of operations for periods prior to* April 30, 2025.*

The following table presents the unaudited pro forma condensed consolidated results of operations for thethree months ended* March 31, 2026and2025* as if the acquisition of Evoke occurred at the beginning of fiscal year2025. The pro forma information provided below is compiled from the preacquisition financial information of Evoke and includes pro forma adjustments to give effect to (i) amortization expense associated with the acquired intangible assets. The pro forma results arenot necessarily indicative of (i) the results of operations that would have occurred had the operations of this acquisition actually been acquired at the beginning of fiscal year2025 or (ii) future results of operations. The results of operations of Evoke from* January 1, 2025to March 31, 2025*included revenues of $374 and a net loss of $131.

NOTE5: ACCOUNTS AND OTHER RECEIVABLES

Details of accounts and other receivables balance is as follows:

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NOTE6: PREPAID EXPENSES

Details of prepaid expenses balance is as follows:

NOTE7: INVENTORY

Details of inventory balance is as follows:

NOTE8: EQUIPMENT

Equipment balance is as follows:

Depreciation expenses were $7 and $9 for thethree months ended* March 31, 2026*, and2025, respectively.

Medical equipment subject to operating leases includes hardware leased to customers as part of the Company’s products and services offerings.

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NOTE9: LEASES

The Company enters into subscription agreements with customers under which it leases EEG equipment and provides services related to EEG testing. The lease terms range from 1 to 2 years. The subscription arrangements are classified as an operating lease. The leases donot transfer ownership of the underlying assets to the customer, donot provide the customer with a purchase option that is reasonably certain to be exercised, and the lease terms donot represent a major part of the remaining economic life of the underlying assets. The underlying assets subject to operating leases consist of EEG equipment. These assets remain on the Company’s balance sheet and are depreciated over their estimated useful lives.

Future undiscounted cash flows from the Company’s operating leases are as follows:

NOTE10: INTANGIBLE ASSETS, NET AND GOODWILL

The following tables summarize the composition of intangible assets as of* March 31, 2026* and* December 31, 2025:*

Amortization expense was $38 and $10 for thethree months ended* March 31, 2026*, and2025, respectively.

The estimated aggregate future amortization expense for intangible assets subject to amortization as of* March 31, 2026*, is summarized below:

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NOTE11: LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT

Israeli labor law requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain circumstances. Pursuant to Section14 of the Israeli Severance Pay Law,1963, all of the Company’s employees are entitled to monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments made in accordance with Section14 relieve the Company from any future severance payments with respect to those employees. In accordance with the Israeli Severance Pay Law,1963, severance payments, which are included in salary and employee benefits, were $10 and $11 for thethree months ended* March 31, 2026*, and2025, respectively.

NOTE12: COMMITMENTS AND CONTINGENCIES

a. Royalty Commitment - Israeli Innovation Authority (“IIA”)

The Company is committed to pay royalties to the State of Israel, through the Israel Innovation Authority (“IIA”), on proceeds from sales of products in which the IIA participated by way of grants for research and development. No grants were received in the period beginning* January 1, 2024through March 31, 2026*. Under the terms of the prior IIA grant agreements, the principal value of financial assistance received along with annual interest based on London Inter-Bank Offered Rate (“LIBOR”) is repayable in form of royalties at 3.0% of BNA™ sales. Since the elimination of LIBOR, the Secured Overnight Financing Rate (“SOFR”) subsequently replaced LIBOR as a reference rate of interest for IIA grant agreements. In the case of lack of commercial feasibility of the project that was financed using the grant, the Company isnot obligated to pay any royalty. The Company cannot reasonably determine the outcome of the commercialization of the underlying technology and considers the liability to be contingent upon generation of sales utilizing said underlying technology, henceno liability has been recognized as of* March 31, 2026*, and* December 31, 2025*. The contingent liability amounts to $5,861 and $5,835 for* March 31, 2026*, and* December 31, 2025* respectively.

Sale of the technology developed utilizing the grants from IIA is restricted and is subject to IIA’s approval.

b. Legal Proceedings

The Company is subject to various claims, complaints, and legal actions in the normal course of business from time to time. After consulting with counsel, the Company isnot aware of any currently pending litigation for which it believes the outcome could have a material adverse effect on its operations or financial position.

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NOTE13: EQUITY

a. Shares

On* February 3, 2026,the Company filed a Prospectus Supplement to amend a registration statement with the Securities and Exchange Commission for an at-the-market ("ATM") offering program pursuant to which the Company may,from time to time, offer and sell shares of its common stock having an aggregate offering price of up to $7,434. The registration statement became effective on February 3, 2026.As of March 31, 2026*the Company hadnot sold any shares under the ATM program.

On* March 8, 2026,the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain accredited investors (the "Investors") for a private placement of units ("Units") at a purchase price of $1.50 per Unit. On March 12, 2026 (*the "Initial Closing"), the Company issued 1,500,000 Units for aggregate gross proceeds of $2,250.

Each Unit consists of: (i)one share of common stock (par value $0.0001), or a pre-funded warrant to purchaseone share of common stock at $0.0001 per share for investors subject to beneficial ownership limitations of 4.99% or 9.99%; (ii)one warrant to purchaseone share of common stock at $1.88 per share exercisable over five years; and (iii)one warrant to purchaseone share of common stock at $2.50 per share exercisable over five years.

The Investors have the right, butnot the obligation, to purchase up to an additional $18,000 of Units inone or more subsequent closings within30 days of the Initial Closing Date. On* April 16, 2026,the Company consummated an additional closing. (see Note17* - Subsequent Events)

The offering was conducted as a private placement under Section4(a)(2) of the Securities Act of1933 and/or Rule506(b) of Regulation D, and was structured to comply with Nasdaq Listing Rule5635(d) without requiring stockholder approval.

The Company has agreed to file a registration statement covering the resale of the shares and warrant shares on or before* May 21, 2026.*

In connection with the Purchase Agreement, each Investor entered into a Lock-Up Agreement restricting transfers of all securities issued under the Purchase Agreement forsix months following the Initial Closing (through* September 12, 2026),followed by asix*-month graduated release ofone-sixth of restricted securities per month through* March 12, 2027.The lock-ups were subsequently amended to have the lock-up period end May 16, 2026.*

b. Warrants

The following table summarizes the Company’s warrant activity for thethree months ended* March 31, 2026*:

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c. Warrants exercisable for little orno consideration**

Warrants exercisable for little orno consideration are fully vested warrants that allow the holders to acquire a specified number of the issuer’s shares at a nominal exercise price. The following table summarizes the Company’s penny warrant activity for thethree months ended* March 31, 2026*:

d. Employees stock option plan

A summary of option activity under the Company’s equity incentive plan as of* March 31, 2026*, and changes during the period then ended is presented below.

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The share-based compensation expense related to options for thethree months ended* March 31, 2026* was $9 and $86 three months ended* March 31, 2025*, respectively. The fair value of options granted for thethree months ended* March 31, 2026and2025*, was$nil and $34, respectively. The intrinsic value of the options outstanding as of* March 31, 2026* is$nil (* December 31, 2025*:$nil).

A summary of the Company’s nonvested options as of* March 31, 2026*, and changes during thethree-month period ended, is presented below.

As of* March 31, 2026*, there was $34 of total unrecognized compensation cost related to nonvested options granted to be recognized over the next 2.5 years.

e. Restricted share units (“RSUs”)

A summary of RSU activity under the Company’s equity incentive plan as of* March 31, 2026*, and changes during the period ended is presented below.

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The share-based compensation expense related to RSUs for thethree months ended* March 31, 2026* was $332 and $1 for thethree months ended* March 31, 2025*, respectively. The fair value of RSUs granted for thethree months ended* March 31, 2026*, and2025, was $1,478 and $31, respectively.

The fair value of each RSU is estimated based on the grant-date fair value of the underlying share of common stock.

A summary of the Company’s nonvested RSUs as of* March 31, 2026*, and changes during thethree-month period ended, is presented below.

As of* March 31, 2026*, there was $1,009 of total unrecognized compensation cost related to nonvested RSUs granted. That cost is expected to be recognized over a weighted average period of 2.14 years.

f. Deferred stock units (“DSUs”)

A summary of DSU activity under the Company’s equity incentive plan as of* March 31, 2026*, and changes during the period ended, is presented below.

The share-based compensation expense related to DSUs for thethree months ended* March 31, 2026* was $82 and$nil for thethree months ended* March 31, 2025*, respectively. The fair value of DSUs granted for thethree months ended* March 31, 2026*, and2025, was$nil, respectively.

The fair value of each DSU is estimated based on the grant-date fair value of the underlying share of common stock.

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A summary of the Company’s nonvested DSUs as of* March 31, 2026*, and changes during thethree-month period ended, is presented below.

As of* March 31, 2026*, there was $191 of total unrecognized compensation cost related to nonvested DSUs granted. That cost is expected to be recognized over a weighted average period of 7 months.

NOTE14: BASIC AND DILUTED NET LOSS PER SHARE

Basic net loss per common share is computed by dividing net loss attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the period. Weighted average number of shares of common stock outstanding during the period computation includes shares of common stock to be contractually issued as of the period end date and warrants exercisable for little orno consideration in relation to the share price. Shares of common stock that were issued and are subject to vesting conditions arenot considered outstanding during the requisite service period.

Diluted net loss per common share is computed by giving effect to all potential dilutive shares of common stock that were outstanding during the period when the effect is dilutive. As of* March 31, 2026*, potential dilutive shares of common stock consist of shares issuable upon exercise of stock options, warrants, RSUs and DSUs. No adjustments have been made to the weighted average outstanding shares of common stock figures for thethree months ended* March 31, 2026*, or2025, as the assumed conversion would be anti-dilutive.

The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share, as such shares would have had an anti-dilutive effect:

For the purposes of the computation of basic and diluted net loss per share, an amount recognized as a deemed dividend reduced net loss available to common stockholders in a manner similar to the application of thetwo-class method. The net loss available to common stockholders for thethree months ended* March 31, 2025*was adjusted by the deemed dividend associated with the Inducement Agreement

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NOTE15: REVENUE

The deferred revenue balance at* March 31, 2026*consists of $194 classified as current and $14 classified as non-current on the condensed consolidated balance sheet.

NOTE16: SEGMENT REPORTING

The Company hasone reportable segment managed on a consolidated basis: Firefly Products. The Company derives revenue primarily in North America and manages the business activities on a consolidated basis. The technology used in our customer arrangements is based on a single software platform that is deployed to and implemented by customers in a similar manner. The service term for the software arrangements is variable. The Company doesnot have intra-entity sales or transfers.

The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer, who reviews financial information presented on a consolidated basis to allocate resources, evaluate financial performance and make overall operating decisions. The measure of segment profit or loss that is most consistent with the consolidated financial statements is consolidated net loss. The accounting policies of our single reportable segment are the same as those for the consolidated financial statements. The level of disaggregation and amounts of significant segment expenses that are regularly provided to the CODM are the same as those presented in the consolidated statements of operations. Likewise, the measure of segment assets is reported on the consolidated balance sheets as total assets.

NOTE17. SUBSEQUENT EVENTS

On* April 16, 2026,the Company consummated an additional closing (the “Additional Closing”) under the Securities Purchase Agreement dated March 8, 2026 (the “Purchase Agreement”), pursuant to which the Company issued 5,333,333 units at a purchase price of $1.50 per unit for aggregate gross proceeds of $8,000. Each unit consisted of eitherone share of common stock orone pre-funded warrant exercisable at $0.0001 per share, together with (i)onefive-year common stock purchase warrant to purchaseone share of common stock at an exercise price of $1.88 per share (the“150%* Warrants”) and (ii)onefive-year common stock purchase warrant to purchaseone share of common stock at an exercise price of $2.50 per share (the*“200%* Warrants”). In connection with the Additional Closing, the Company issued 762,208 shares of common stock, a pre-funded warrant to purchase 4,571,125 shares of common stock,150% Warrants to purchase 5,333,333 shares of common stock, and200% Warrants to purchase 5,333,333 shares of common stock, all warrants expiring* April 16, 2031.The exercise of all warrants is subject to a 4.99% beneficial ownership limitation. The securities were issued in a private placement pursuant to Section4*(a)(2) of the Securities Act of1933, as amended, and Rule506(b) of Regulation D thereunder. In connection with the Additional Closing, the Company and the investor entered into an amended and restated lock-up agreement restricting transfers of the securities for a30-day period ending* May 16, 2026.The Company has agreed to file a registration statement covering the resale of the shares and warrant shares by May 21, 2026.*

On* May 6, 2026,the Company entered into a securities purchase agreement (the “May 2026Purchase Agreement”) with an accredited investor (the “May 2026Investor”), pursuant to which the Company agreed to issue and sell to the May 2026Investor up to 666,667 units (each a “May 2026Unit” and, collectively, the “May 2026Units”), at a purchase price of $1.50 per May 2026Unit, for aggregate gross proceeds of up to $1,000. Each May 2026Unit consists of (i)one share of Common Stock, par value $0.0001 per share (each a “May 2026Share” and, collectively, the “May 2026Shares”); (ii)one common stock purchase warrant (each a “May150%* Warrant” and, collectively, the* “May150%* Warrants”) to purchaseone share of Common Stock overfive (5) years at an exercise price of $1.88 per share; (iii)one common stock purchase warrant (the* “May200%* Warrant”, together with the* May150%* Warrants, the* “May 2026Warrants”) to purchaseone share of Common Stock overfive* (5) years at an exercise price of $2.50 per share; and (iv) the issuance of the Common Stock upon the exercise of the* May 2026Warrants (collectively, the “May 2026Warrant Shares”). The May 2026Warrants include a beneficial ownership limitation, which provides that the Company shallnot* effect any exercise, and a holder shallnot have the right to exercise any portion of the* May 2026Warrants, to the extent that, after giving effect to such exercise, the holder (together with the holder’s affiliates) would beneficially own more than 4.99% or 9.99%, as applicable to the May 2026Investor, of the outstanding shares of Common Stock immediately after the issuance of the Common Stock issuable upon such exercise. The May 2026Warrants arenot* exercisable until the Company has obtained approval from its stockholders (“Shareholder Approval”) for the issuance of the Common Stock. The Company is required to use commercially reasonable efforts to obtain Shareholder Approval withinninety (90) days following the date of the* May 2026*Purchase Agreement.

Pursuant to the* May 2026Purchase Agreement, the Company agreed to file a registration statement with the SEC covering the resale of the May 2026Shares and the May 2026Warrant Shares as soon as practicable and, in any event, on or before May 21, 2026.*The closing of the offering is conditioned on the effectiveness of such registration statement and receipt of Shareholder Approval.

The securities were offered and sold in a private placement in reliance on the exemption from registration provided by Section4(a)(2) of the Securities Act and Rule506 of Regulation D promulgated thereunder. As of the date of this Quarterly Report on Form10-Q, the closing of this offering hadnot yet occurred.

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