What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-05 compared with 2025-03-07 · 47 added, 63 removed, 163 unchanged (40% of the section changed)

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Please also see the section titled “Special Note Regarding Forward-Looking Statements.” Unless stated otherwise, all references to “$” are to United States dollars in thousands and all references to “C$” are to Canadian dollars in thousands.

We are a commercial-stage medical device company focused on the development and marketing of customizable, incision-free therapeutic systems for the image guided ablation of diseased tissue utilizing its platform technologies and leveraging the healthcare system’s existing imaging infrastructure.

We are a commercial-stage medical device company focused on the development and marketing of AI-powered, MRI-guided, incision-free therapies for the ablation of diseased tissue utilizing our platform technologies and leveraging the healthcare system’s existing imaging infrastructure.

Our lead product (the “ TULSA-PRO system ”) combines real-time MRI, robotically driven transurethral sweeping-action thermal ultrasound with closed-loop temperature feedback control for the ablation of prostate tissue.

product is comprised of one-time-use devices and durable equipment that are used in conjunction with a customer’s existing MRI scanner.

The product is comprised of one-time-use devices and capital equipment that are used in conjunction with a customer’s existing MRI scanner.

We are commercializing TULSA-PRO, a technology that combines real-time MRI, robotically-driven transurethral ultrasound and closed-loop temperature feedback control.

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We are in the early stages of exploring additional potential treatment markets for Sonalleve where the technology has been shown to have clinical application, such as non-invasive ablation of abdominal cancers and hyperthermia for cancer therapy.

We deploy a hybrid recurring revenue business model in the United States to market TULSA-PRO, i) charging a one-time payment that includes a supply of our one-time-use device, use of the system as well as our Genius services that support each TULSA center with clinical and patient recruitment and ii) a traditional model of charging for the system separately as capital and an additional per patient charge for the one-time-use devices and associated Genius services..

The Sonalleve product is marketed primarily outside North America in European and Asian countries, deploying a capital sales model.

Outside of North America, we generate most of our revenues from our system sales in Europe and Asia, where we deploy a more traditional hybrid business model, charging for the system separately as a capital sale and an additional per patient charge for the one-time-use devices and associated Genius services.

Profound’s Technology

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Recent Developments

On January 2, 2024, the Company closed a public offering, resulting in the issuance of 2,666,667 common shares at a price of $7.50, for gross proceeds of $20,000.

On January 16, 2024, the Company closed a non-brokered private placement, resulting in the issuance of 391,667 common shares at a price of $7.50, for gross proceeds of $2,938.

On December 22, 2025, we closed a public offering, resulting in the issuance of 5,142,870 common shares at a price of $7.00 per share, for gross proceeds of $36,000.

On December 30, 2025, we closed a private placement, resulting in the issuance of 921,428 common shares at a price of $7.00, for gross proceeds of $6,450.

Key Components of Our Results of Operations

The Sonalleve product is marketed primarily outside North America in European and Asian countries deploying a one-time capital sales model with limited recurring service revenue.

Outside of North America, we generate most of our revenues from our system sales (both TULSA-PRO and Sonalleve) in Europe and Asia where we deploy a more traditional hybrid business model, charging for the system separately as capital and an additional per patient charge for the one-time-use devices and associated Genius services.

Revenue is comprised of recurring – non-capital revenue, which consists of the sale of one-time-use devices, lease of medical devices, procedures and services associated with extended warranties and capital equipment, which is the one-time sale of capital equipment.

We deploy a hybrid revenue business model in the United States to market TULSA-PRO by charging for the system separately as capital and an additional charge for the one-time-use devices.

The Sonalleve product is marketed primarily outside North America deploying a one-time capital sales model with limited recurring service revenue.

Outside of North America, we generate most of our revenues from our system sales (both TULSA-PRO and Sonalleve) in Europe and Asia where we deploy a hybrid business model, charging for the system separately as capital and an additional charge for the one-time-use devices.

Revenue is comprised of (a) recurring – non-capital revenue, which consists of the sale of one-time-use devices and services associated with extended warranties and (b) capital equipment, which is the one-time sale of capital equipment and the lease of capital equipment.

For the year ended December 31, 2025, we recorded revenue totaling $16,098, with $6,368 from the one-time sale of capital equipment and $9,730 from recurring – non-capital revenue.

For the year ended December 31, 2024, we recorded revenue of $10,680, with $2,440 from the one-time sale of capital equipment and $8,240 from recurring – non-capital revenue.

The increase of $3,481 or 48% in revenue for the year ended December 31, 2024, was the result of higher recurring revenue and capital sales in the United States during 2024.

The increase of $5,418 or 51% in revenue for the year ended December 31, 2025, was the result of higher recurring revenue and capital sales in the United States and overseas during 2025.

Cost of sales

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For the year ended December 31, 2024, we recorded a cost of sales of $3,643, related to the sale of medical devices, capital and non-capital, which reflects a 66% gross profit.

The gross profit was higher in 2024 by $2,725 or 63% due to manufacturing operating at higher efficiency rates based on improvements that have been implemented and the growth in the number of capital systems sold.

The gross profit was higher in 2025 by $4,356 or 62% due to increased selling prices coupled with the growth in the number of capital systems sold.

Operating Expenses

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For the year ended December 31, 2025, R&D expenses increased by $3,631, or 21% to $20,596 compared to $16,965 for the year ended December 31, 2024.

The increase in R&D expenses was largely due to increased headcount and lower reimbursement of workforce costs associated with research projects, increased enrolment for the CAPTAIN trial and recruitment efforts, and higher material expenditures due to spending on R&D initiatives to increase compatibility with MRI scanners, reduce design costs and improve efficiencies.

The increase in R&D expenses was largely due to increased headcount, increased enrolment for the CAPTAIN trial and higher material expenditures and travel associated with the trial, and increased testing and design modification.

These expenses promote the ongoing development and improvement of the products while further strengthening the commitment to a reliable and customizable product.

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SG&A expenses for the year ended December 31, 2025 increased by $8,917, or 39% to $32,051 compared to $23,134 for the year ended December 31, 2024.

The increase in SG&A was due to increased sales force and commission payments, the release of commercial segments and marketing advertisement campaigns, increased travel for conferences, bad debt expense and costs associated with hosting our educational event Pro-Talk Live in September 2024.

Offsetting these amounts was a decrease to insurance due to lower premium rates.

The increase in SG&A was due to increased sales force and commission payments, increased travel for conferences, customer visits and educational events throughout the year.

Offsetting these amounts was a decrease to insurance due to lower premium rates and a reduction in bad debt expense.

Net finance (income) expense

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(i) the CIBC Credit Agreement (as defined herein) accreting to the principal amount repayable and its related interest expense;

(ii) interest income from cash and cash equivalents;

(iii) the lease liability interest expense;

and (iv) the interest income on trade and other receivables.

Net finance (income) expense increased $661 to ($1,436) during the year ended December 31, 2024, compared to ($775) during the year ended December 31, 2024.

The increase in net finance (income) expense was due to the change in the amortized cost of trade and other receivables being fully recognized, increase in interest income from cash and cash equivalents and decrease in the CIBC Loan interest and accretion expenses.

and (ii) interest income from cash and cash equivalents.

Net finance (income) expense decreased $366 to $(1,070) during the year ended December 31, 2025, compared to $(1,436) during the year ended December 31, 2024.

The decrease in net finance (income) expense was due to the decrease in interest income from cash and cash equivalents due to a lower cash balance.

Liquidity and Capital Resources

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2025 Offering and non-brokered private placement

We received net proceeds of $21,079 from the Public Offering and Private Placement completed in January 2024.

We intend to use net proceeds from the Public Offering and Private Placement to fund the continued commercialization of the TULSA-PRO system in the United States, the continued development and commercialization of the TULSA-PRO system and the SONALLEVE system globally

and for working capital and general corporate purposes.

In addition, there have been no material adjustments to the cost or timing of the business objective previously disclosed in such prospectus supplement.

Total spending as

of December 31,

TULSA-PRO commercialization

Sonalleve development and commercialization

Working capital and general corporate purposes

On December 10, 2024, we received net proceeds of $36,132 from the public offering of 5,366,705 Common Shares at $7.50.

We intend to use net proceeds from the public offering to fund the continued commercialization of the TULSA-PRO system in the United States, the continued development and commercialization of the TULSA-PRO system and the SONALLEVE system globally and for working capital and general corporate purposes.

We received net proceeds of $40,801 from the Public Offering and Private Placement completed in December 2025.

On December 22, 2025, we received net proceeds of $34,379 from the public offering of 5,142,870 Common Shares at an offering price of $7.00 per share.

On December 30, 2025, we received net proceeds of $6,422 from the private placement of 921,428 Common Shares at an offering price of $7.00 per share.

We intend to use net proceeds from the public offering and private placement to fund the continued commercialization of the TULSA-PRO system in the United States, the continued development and commercialization of the TULSA-PRO system and the Sonalleve system globally and for working capital and general corporate purposes.

As of December 31, 2025, we had yet to use any of the proceeds.

We entered into a credit agreement with Canadian Imperial Bank of Commerce (“ CIBC ”) on November 3, 2022 (the “ Original CIBC Credit Agreement ”), for gross proceeds of C$10,000, maturing on November 3, 2027, with an interest rate based on CIBC prime plus 2% (the “ CIBC Loan ”).

We were required to make interest-only payments until October 31, 2023, and monthly repayments on the principal of C$208 plus accrued interest commenced on October 31, 2023.

All of our obligations under the Original CIBC Credit Agreement are guaranteed by our current and future subsidiaries and include security of first priority interests in our and our subsidiaries’ assets.

Initially, we had financial covenants in relation to the CIBC Loan where unrestricted cash is at all times greater than EBITDA for the most recent six-month period, reported on a monthly basis and that revenue for any fiscal quarter must be 15% greater than revenue for the same fiscal quarter in the prior fiscal year, reported on a quarterly basis.

On September 26, 2023 an amendment to the CIBC Loan resulted in a change to the financial covenants.

The amended covenants are that unrestricted cash must at all times be greater of:

(i) to the extent EBITDA is negative for such period, EBITDA for the most recent nine-month period or (ii) $7,500, reported on a monthly basis;

and that recurring revenue for any fiscal quarter must be 15% greater than recurring revenue for the same fiscal quarter in the prior fiscal year, reported on a quarterly basis.

On May 3, 2024, a second amendment to the CIBC Loan resulted in another amendment to the financial covenants.

The amended covenants are that the recurring revenue covenant shall not be tested for any fiscal quarter in the 2024 fiscal year so long as unrestricted cash is no less than 2.5 multiplied by the principal amount of outstanding CIBC Loan at all times.

We are in compliance with these financial covenants as at December 31, 2024.

On May 3, 2024, a second amendment to the CIBC Loan resulted in another amendment to the financial covenants.

The amended covenants are that the recurring revenue covenant shall not be tested for any fiscal quarter in the 2024 fiscal year so long as unrestricted cash is no less than 2.5 multiplied by the outstanding principal amount of the CIBC Loan at all times.

We are in compliance with these financial covenants as at December 31, 2024.

On March 3, 2025, we entered into an amended and restated credit agreement with CIBC (the “ CIBC Credit Agreement ”), which amended the terms of the CIBC Loan and the existing long-term debt provided under the Original CIBC Credit Agreement was repaid with proceeds from a new revolving line of credit provided by CIBC to us.

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Additionally, the CIBC Credit Agreement provides that we may request a one-time increase in the principal amount of the revolving line of credit up to a maximum amount of $10,000, which is subject to the approval of CIBC in its sole discretion.

On September 30, 2025, an amendment to the CIBC Credit Agreement resulted in a change to one of the financial covenants.

The amended covenant is that unrestricted cash must at all times be greater of:

(i) to the extent that EBITDA is a negative number or loss for the most recent six-month period, the amount of such loss, or (ii) $10,000, reported on a monthly basis.

We are in compliance with these financial covenants as of December 31, 2025.

Future compliance with the financial covenants included in the CIBC Credit Agreement is dependent upon achieving certain revenue, EBITDA, and anticipated unrestricted cash levels.

We manage liquidity risk by monitoring actual and projected cash flows.

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Cash provided by (used in) operating activities

Cash provided by (used in) investing

Cash provided by (used in) financing activities

Foreign exchange on cash

Net increase (decrease) in cash

Net increase in cash

Operating Activities

Net cash provided by (used in) operating activities for the year ended December 31, 2025 was $(38,207).

The principal use of the operating cash flows during the year related to a net loss of $42,570 and a decrease in net operating assets and liabilities of $1,713 and partially offset by non-cash charges of $6,076.

The cash used in operating expenses was primarily due to the increased efforts supporting the commercialization and expansion of our products and teams.

This resulted in an increase in headcount, travel and R&D expenses.

Non-cash charges consisted primarily of share-based compensation, amortization and depreciation.

Net cash provided by (used in) operating activities for the year ended December 31, 2024 was $(23,453).

The principal use of the operating cash flows during the year related to a net loss of $27,816 and an increase in net operating assets and liabilities of $591 and partially offset by non-cash charges of $3,772.

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Non-cash charges consisted primarily of share-based compensation, amortization and depreciation.

Net cash provided by (used in) operating activities for the year ended December 31, 2023 was $(22,589).

The principal use of the operating cash flows during the year related to a net loss of $28,323 and an increase in net operating asset and liabilities of $540 and by non-cash charges of $5,174.

The cash used in operating expenses was primarily due to the increased headcount and commission payments, increased sales and marketing efforts in the US and overall consulting and legal fees.

Non-cash charges consisted primarily of share-based compensation, amortization and depreciation.

Investing Activities

Net cash provided by (used in) investing activities for the year ended December 31, 2025 was $(242) which consisted of purchases of property and equipment and intangible assets.

Financing Activities

Net cash provided by (used in) financing activities for the year ended December 31, 2025 was $41,138 primarily from the proceeds of the issuance of common shares of $41,420, net of issuance costs, and proceeds of $8 from the exercise of share options which were offset by the $290 repayments of long-term debt.

Net cash provided by (used in) financing activities for the year ended December 31, 2023 was $1,756 primarily of proceeds from the issuance of warrants of $2,423 and proceeds of $245 from the exercise of share options which were offset by the $912 repayments of long-term debt.

Net cash provided by (used in) financing activities for the year ended December 31, 2024 was $54,696 primarily from the proceeds of the issuance of common shares of $57,211, net of issuance costs, and proceeds of $45 from the exercise of share options which were offset by the $2,560 repayments of long-term debt.

Foreign Exchange on Cash

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Revenue is derived primarily from the sale of the TULSA-PRO and Sonalleve systems and one-time use devices.

All products generally contain a one-year warranty.

The Company recognizes revenue when the customer obtains control of promised goods or services and in an amount that reflects the consideration to which the Company expects to be entitled to receive in exchange for those goods or services.

To achieve this core principle, the Company applies the five-step revenue model to contracts within its scope:

All products generally include a one-year warranty.

We recognize revenue when the customer obtains control of promised goods or services and in an amount that reflects the consideration which we expect to be entitled to receive in exchange for those goods or services.

To achieve this core principle, we apply the five-step revenue model to contracts within our scope:

(i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

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Capital equipment

Capital equipment revenue consists of the sale of capital equipment including installation and training amounts.

Capital equipment revenue consists of the sale of capital equipment including installation and training amounts, which includes sales to distributors.

Revenue is recognized when the Company transfers control to the customer, which is generally at the time of shipment.

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Sales to distributors

The Company markets and sells its products primarily through its direct sales force, which sells its products to end customers.

A portion of the Company’s revenue is generated by sales to distributors primarily in Europe and Asia.

When the Company transacts with a distributor, its contractual arrangement is with the distributor and not with the end customer.

Whether the Company transacts business with and receives the order from a distributor or directly from an end customer, its revenue recognition policy and resulting pattern of revenue recognition for the order are generally the same.

We market and sell our products primarily through our direct sales force, which sells our products to end customers.

A portion of our revenue is generated by sales to distributors.

In markets where we do not maintain a direct presence, we engage distribution partners.

When we transact with a distributor, our contractual arrangement is with the distributor and not with the end customer.

Whether we transact business with and receive the order from a distributor or directly from an end customer, our revenue recognition policy and resulting pattern of revenue recognition for the order are generally the same.

Critical accounting estimates

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Trade and other receivables are stated net of an allowance for expected credit losses.

The Company grants credit to customers in the normal course of business and maintains an allowance for expected credit losses which reflect the current estimate of expected credit losses expected to be incurred over the life of the receivables.

The Company considers various factors in establishing, monitoring, and adjusting its allowance for expected credit losses, including the aging of the accounts and aging trends, the historical level of charge-offs, and specific credit exposures related to particular customers.

The Company also monitors other risk factors and forward-looking information, such as country risk, when determining credit limits for customers and establishing adequate allowances.

We grant credit to customers in the normal course of business and maintains an allowance for expected credit losses which reflect the current estimate of expected credit losses expected to be incurred over the life of the receivables.

We consider various factors in establishing, monitoring, and adjusting our allowance for expected credit losses, including the aging of the accounts and aging trends, the historical level of charge-offs, and specific credit exposures related to particular customers.

We also monitor other risk factors and forward-looking information, such as country risk, when determining credit limits for customers and establishing adequate allowances.

Uncollectible accounts are written-off against the allowance when there is no reasonable expectation of recovery.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis