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Item 1. Financial Statements

2025-11-12 compared with 2025-08-13 · 568 added, 333 removed, 270 unchanged (77% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF June 30, 2025 AND DECEMBER 31, 2024

AS OF SEPTEMBER 30, 2025 AND DECEMBER

(IN THOUSANDS, EXCEPT SHARE DATA)

September 30,

Current assets

$ 5,918 $ 1,810

Other receivables

Prepaid expenses

Inventory 133 -

Total current assets

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Intangible assets, net

Goodwill 5,175 -

Total non current assets

$ 14,938 $ 4,601

Current liabilities

Trade payables

$ 1,502 $ 1,816

Accrued liabilities

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TOTAL LIABILITIES

$ 2,838 $ 4,976

COMMITMENTS AND CONTINGENCIES (Note 12)

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1,000,000 shares authorized;

nil issued and outstanding at June 30, 2025 and December 31, 2024

nil issued and outstanding at September 30, 2025 and December 31, 2024

Common shares, $ 0.0001 par value:

100,000,000 shares authorized;

13,298,838 and 8,122,060 issued and outstanding at June 30, 2025 and December 31, 2024, respectively 1 -

13,477,012 and 8,122,060 issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

118,356 86,709

Accumulated deficit

( 106,257 ) ( 87,084 )

TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)

12,100 ( 375 )

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$ 14,938 $ 4,601

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed

consolidated financial statements.

FIREFLY NEUROSCIENCE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2025 AND 2024

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

COST OF GOODS SOLD

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General and administration expenses

Impairment of intangible assets

TOTAL OPERATING EXPENSES

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WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

FIREFLY NEUROSCIENCE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY (DEFICIT)

JUNE 30, 2025 AND 2024

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF CHANGES IN SHAREHOLDERS ’ EQUITY (DEFICIT)

SEPTEMBER 30, 2025 AND 2024

(IN THOUSANDS, EXCEPT SHARE DATA)

Preferred stock

Shareholder’s

equity (deficit)

BALANCE AT DECEMBER 31, 2024

Private placement, net of issuance costs

Shares issued - warrants exercised

Shares issued for conversion of Convertible Promissory Note

Shares issues for consulting services

Share-based compensation expense

Deemed dividend on warrant inducement

BALANCE AT MARCH 31, 2025

Private placement, net of issuance costs

Shares issued for debt

Shares issued for Evoke acquisition

Share-based compensation expense

Deemed dividend on warrant inducement

BALANCE AT JUNE 30, 2025

BALANCE AT DECEMBER 31, 2023

Series B Preferred Stock conversion

Series C Preferred Stock Units offering

Share-based compensation expense

BALANCE AT MARCH 31, 2024

Series B Preferred Stock conversion

Series C Preferred Stock Units offering

Share-based compensation expense

BALANCE AT JUNE 30, 2024

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AT DECEMBER 31, 2024

placement, net of issuance costs

issued - warrants exercised

issued for conversion of Convertible Promissory Note

issues for consulting services

compensation expense

dividend on warrant inducement

AT MARCH 31, 2025

$ ( 104,424 )

placement, net of issuance costs

issued for debt

issued for Evoke acquisition

compensation expense

dividend on warrant inducement

AT JUNE 30, 2025

$ ( 106,257 )

placement, net of issuance costs

issued - warrants exercised

compensation expense

AT SEPTEMBER 30, 2025

$ ( 108,896 )

AT DECEMBER 31, 2023

( 1,516,199 )

B Preferred Stock conversion

( 1,516,199 )

C Preferred Stock Units offering

compensation expense

AT MARCH 31, 2024

B Preferred Stock conversion

C Preferred Stock Units offering

compensation expense

AT JUNE 30, 2024

former shareholders of WaveDancer

C Preferred Stock Units offering

placement net of issuance costs

issued for debt

issued for future settlement of debt

issued for consulting services

issued for prepaid services

issued - stock options, warrants, and RSU exercises

Based Compensation Expense

shares issued to directors

AT SEPTEMBER 30, 2024

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

FIREFLY NEUROSCIENCE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND 2024

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

2025 AND 2024

(IN THOUSANDS)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Depreciation and amortization

Impairment of intangible asset

Share-based compensation expense

3 unchanged sentences

Loss on shares issued for debt

Drawdown in shares issued for prepaid services

Expense recognized from prepaid credits used originally issued with shares

Shares issued for consulting services

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Product enhancement – intangible asset

Proceeds from recapitalization transaction

Net cash used in investing activities

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Non-cash investing and financing activities

Deemed issuance of common shares to former shareholders’ of WaveDancer

Share issuance for prepaid services

Shares issued for conversion of the convertible promissory note

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Non-cash acquisition of equipment

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

FIREFLY NEUROSCIENCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

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Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.), a Delaware corporation, and its wholly owned subsidiaries Firefly Neuroscience 2023, Inc., a Delaware corporation (formerly known as Firefly Neuroscience, Inc.), Firefly Neuroscience Ltd., an Israeli corporation (formerly known as Elminda Ltd.), Elminda 2022 Inc., a Delaware corporation (formerly known as Elminda Inc.), 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.

On April 30, 2025, the Company acquired all outstanding stock of Evoke Neuroscience, Inc.

(“Evoke”), a Delaware corporation, a privately held company which provides customers with a package of hardware and software to measure the electrical activity of the brain.

(formerly WaveDancer, Inc.), a Delaware

corporation, and its wholly owned subsidiaries Firefly Neuroscience 2023, Inc., a Delaware corporation (formerly known as Firefly

Neuroscience, Inc.), Firefly Neuroscience Ltd., an Israeli corporation (formerly known as Elminda Ltd.), Elminda 2022 Inc., a Delaware

corporation (formerly known as Elminda Inc.), 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

On November 15, 2023, we entered into the Agreement and Plan of Merger

(as amended, the “Merger Agreement”) with WaveDancer and FFN Merger Sub, Inc.

(“Merger Sub”), pursuant to which,

among other things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub merged with

and into Private Firefly, with Private Firefly becoming a wholly-owned subsidiary of WaveDancer and the surviving corporation of the merger

(the “Merger”).

On August 12, 2024, the Merger closed, and on August 13, 2024, we began trading on the Nasdaq Capital Market

under the ticker symbol “AIFF.”

On April 30, 2025, the Company acquired all outstanding stock

of Evoke Neuroscience, Inc.

(“Evoke”), a Delaware corporation, a privately held company which provides customers with

a package of hardware and software to measure the electrical activity of the brain.

GOING CONCERN

As of June 30, 2025, the Company had an accumulated deficit of $ 106,257 and negative cash flow from operating activities for the six months ended June 30, 2025, of $ 4,901 .

Further, the Company has recurring losses with minimal revenue from operations and expects to continue generating losses and using cash for operations.

As of September 30, 2025, the Company had an accumulated deficit of

$ 108,896 and negative cash flow from operating activities for the nine months ended September 30, 2025, of $ 6,389 .

the Company has recurring losses with minimal revenue from operations and expects to continue generating losses and using cash for

On April 30, 2025, the Company paid $ 3,000 of cash for the acquisition of Evoke (Note 4).

The Company’s cash requirements have been met through the sales of common stock 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.

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 be no assurance that the Company will be able to obtain additional funding on satisfactory terms or at all.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

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

be no assurance that the Company will be able to obtain additional funding on satisfactory terms or at all.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING

Basis of presentation

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

The results reported in these unaudited condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be 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, 2024, and the notes thereto included in the Company’s Form 10 -K filed with the SEC on April 3, 2025.

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.

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.

The results reported in these unaudited condensed consolidated financial

statements should not be regarded as necessarily indicative of results that may be expected for any subsequent period or for the entire

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, 2024, and the notes thereto included in the Company’s

Form 10-K filed with the SEC on April 3, 2025.

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.

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

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.

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 a two-tier consolidation model:

one focused on voting rights (the voting interest model) and the second focused on a qualitative analysis of power over significant activities and exposure to potentially significant losses or benefits (the variable interest model).

All entities are first evaluated to determine whether they are variable interest entities (“VIE”).

If an entity is determined not 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.

one focused on voting rights (the voting interest model) and the

second focused on a qualitative analysis of power over significant activities and exposure to potentially significant losses or

benefits (the variable interest model).

All entities are first evaluated to determine whether they are variable interest entities

If an entity is determined not 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.

Use of estimates in the preparation of consolidated financial

The preparation of consolidated financial statements in conformity

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.

Significant accounting policies

With the exception of Business Combinations, Goodwill, Intangible Assets, and Inventory as described below, there have been no new or material changes to the significant accounting policies discussed in the Company’s audited consolidated financial statements for the year ended December 31, 2024.

Apart from Business Combinations, Goodwill, Intangible Assets, and

Inventory as described below, there have been no new or material changes to the significant accounting policies discussed in the

Company’s audited consolidated financial statements for the year ended December 31, 2024.

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of an acquisition is allocated to the assets acquired and liabilities assumed based on their fair values, as determined by management at the acquisition date.

Contingent consideration obligations that are elements of consideration transferred are recognized at the acquisition date as part of the fair value transferred in exchange for the acquired business.

Contingent consideration arrangements are remeasure at fair value at each reporting period.

Examples of critical estimates in valuing certain of the intangible assets acquired include, but are not limited to, future expected cash inflows and outflows, future fundraising assumptions, expected useful life, discount rates and income tax rates.

Acquisition-related costs incurred in connection with a business combination are expensed as incurred and are included in general and administrative expenses in the condensed consolidated statements of operations.

Goodwill is the excess of consideration paid for an acquired entity over the fair value of the amounts assigned to assets acquired, including other identifiable intangible assets, and liabilities assumed in a business combination.

To determine the amount of goodwill resulting from a business combination, the Company performs an assessment to determine the acquisition date fair value of the acquired company’s tangible and identifiable intangible assets and liabilities.

Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset may be impaired.

An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

These qualitative factors include:

macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events.

If the entity determines that this threshold is met, then the Company may apply a one -step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

The Company determines fair value through multiple valuation techniques and weights the results accordingly.

The Company is required to make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of its reporting units.

The Company has elected to perform its annual goodwill impairment review on December 31 of each year utilizing a qualitative assessment to determine if it was more likely than not that the fair value of each of its reporting units was less than their respective carrying values.

The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of an acquisition

is allocated to the assets acquired and liabilities assumed based on their fair values, as determined by management at the acquisition

Contingent consideration expected to be paid upon achievement of negotiated milestones are recognized at the acquisition date as

part of the fair value transferred in exchange for the acquired business.

Contingent consideration arrangements are remeasured at fair

value at each reporting period until settled or expiration of the arrangement.

Examples of critical estimates in valuing certain of the

intangible assets acquired include, but are not limited to, future expected cash inflows and outflows, expected useful life, discount

rates and income tax rates.

Acquisition-related costs incurred in connection with a business combination are expensed as incurred and

are included in general and administrative expenses in the condensed consolidated statements of operations.

Goodwill is the excess of consideration paid for an acquired entity

over the fair value of the amounts assigned to assets acquired, including other identifiable intangible assets, and liabilities assumed

in a business combination.

To determine the amount of goodwill resulting from a business combination, the Company performs an assessment

to determine the acquisition date fair value of the acquired company’s tangible and identifiable intangible assets and liabilities.

Goodwill is required to be evaluated for impairment on an annual basis

or whenever events or changes in circumstances indicate the asset may be impaired.

An entity has the option to first assess qualitative

factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the

fair value of a reporting unit is less than it carrying amount.

These qualitative factors include macroeconomic and industry conditions,

cost factors, overall financial performance, and other relevant entity-specific events.

If the entity determines that this threshold is

met, then the Company may apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting

unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

determines fair value through multiple valuation techniques and weighs the results accordingly.

The Company is required to make certain

subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates

used to determine the fair value of its reporting units.

The Company has elected to perform its annual goodwill impairment review on December 31

of each year utilizing a qualitative assessment to determine if it was more likely than not that the fair value of each of its reporting

units was less than their respective carrying values.

Intangible assets

Identifiable intangible assets primarily include developed technology, software development costs, trade name and non-compete agreements.

Amortizable intangible assets are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the assets may be impaired.

If an indicator of impairment exists, the Company will compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset.

If the undiscounted cash flows exceed the carrying value, no impairment is indicated.

If the undiscounted cash flows do not exceed the carrying value, then impairment, if any, is measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow model.

Inventory, which consists of material, labor, and manufacturing overhead and are valued at the lower of cost or net realizable value.

Cost is determined using the first -in, first -out (“FIFO”) method.

Identifiable intangible assets primarily include developed

technology, software development costs, trade name and non-compete agreements.

Amortizable intangible assets are amortized on a

straight-line basis over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances

indicate that the assets may be impaired.

If an indicator of impairment exists, the Company will compare the estimated future cash

flows of the asset, on an undiscounted basis, to the carrying value of the asset.

If the undiscounted cash flows exceed the carrying

value, no impairment is indicated.

If the undiscounted cash flows do not exceed the carrying value, then impairment, if any, is

measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow

Inventory, which consists of material, labor, and manufacturing

overhead and are valued at the lower cost or net realizable value.

Cost is determined using the first-in, first-out (“FIFO”)

The Company periodically reviews the realizability of its inventory for potential excess or obsolescence.

Determining the net realizable value of inventory requires management’s judgment.

Conditions impacting the realizability of the Company’s inventory could cause actual asset write-offs to be materially different than the Company’s current estimates as of June 30, 2025.

Determining the net

realizable value of inventory requires management’s judgment.

Conditions impacting the realizability of the Company’s inventory

could cause actual asset write-offs to be materially different than the Company’s current estimates as of September 30, 2025.

Revenue Recognition

Revenue consists of EEG testing, equipment rental, equipment sales, the undertaking of projects and clinical studies, and other related services.

Revenue is recognized in accordance with ASC 606, “Revenue from Contracts with Customers” (“ASC 606” ).

Revenue consists of EEG testing, equipment rental, equipment

sales, the undertaking of projects and clinical studies, and other related services.

Revenue is recognized in accordance with ASC 606, “Revenue from

Contracts with Customers” (“ASC 606”).

The Company performs the following five steps:

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recognize revenue when (or as) the entity satisfies a performance obligation.

The Company applies this five -step model to arrangements that meet the definition of a contract under ASC 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company evaluates the goods or services promised within each contract, related performance obligation and assesses whether each promised good or service is distinct.

The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied at a point in time.

The Company’s revenues are measured based on the consideration specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities.

For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price.

The Company applies this five-step model to arrangements that meet

the definition of a contract under ASC 606, including when it is probable that the entity will collect the consideration it is entitled

to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within

the scope of ASC 606, the Company evaluates the goods or services promised within each contract, related performance obligation and assesses

whether each promised good or service is distinct.

The Company recognizes as revenue the amount of the transaction price that is allocated

to the respective performance obligation when (or as) the performance obligation is satisfied at a point in time.

The Company’s revenues are measured based on the considerations

specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government

For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling

Standalone selling prices are based on observable prices at which the Company separately sells the products or services.

The Company regularly reviews standalone selling prices and updates these estimates, as necessary.

The Company offerings are assessed to determine whether an embedded lease arrangement exists.

regularly reviews standalone selling prices and updates these estimates, as necessary.

The Company offerings are assessed to determine whether an embedded

lease arrangement exists.

The Company identifies certain contracts to be within the scope of ASC 842 and ASC 606.

For contracts that are in the scope of both ASC 842 and ASC 606, and in which the lease component is an operating lease, the Company applies the practical expedient in ASC 842 to combine the lease component and non-lease components, and to account for the combined components as a single lease component.

For contracts that are

in the scope of both ASC 842 and ASC 606, and in which the lease component is an operating lease, the Company applies the practical expedient

in ASC 842 to combine the lease component and non-lease components, and to account for the combined components as a single lease component.

Accordingly, the Company accounts for the monthly payments as lease revenue.

Deferred revenue

Deferred revenue consists of payments received from customers in advance of satisfying a performance obligation identified in accordance with ASC 606.

The change in the deferred revenue balance for the six months ended June 30, 2025 and 2024 was driven by payments from customers in advance of satisfying the performance obligations, offset by revenue recognized as performance obligations were completed.

Deferred revenue consists of payments received from customers in advance

of satisfying a performance obligation identified in accordance with ASC 606.

The change in the deferred revenue balance as of September

30, 2025 and December 31, 2024 was driven by payments from customers in advance of satisfying the performance obligations, offset

by revenue recognized as performance obligations were completed.

Impact of recently issued accounting standards

In December 2023, the FASB issued ASU 2023 - 09 “Income Taxes (Topics 740 ):

Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

In December 2023, the FASB issued ASU 2023-09 “Income Taxes

(Topics 740):

Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically

related to the rate of reconciliation and income taxes paid.

ASU 2023-09 is effective for the Company’s fiscal year 2025.

The Company will include such disclosure in its Annual Report on Form 10 -K for the year ended December 31, 2025.

The Company has evaluated issued Accounting Standards Updates that have not yet been adopted and believes the adoption of these standards will not have a material impact on its condensed consolidated financial statements.

Company will include such disclosure in its Annual Report on Form 10-K for the year ended December 31, 2025.

The Company has evaluated issued Accounting Standards Updates that

have not yet been adopted and believes the adoption of these standards will not have a material impact on its condensed consolidated financial

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 a thirty-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”).

Each Seller agreed not to sell, transfer, or otherwise dispose of any Shares, or engage in any transaction that would transfer the economic benefits of the Shares during the Lock-Up Period (the “Lock-Up Period”) without the prior written consent of the Company.

The Lock-Up Period began on the closing date and will end on the earlier of (a) six months after the closing date or (b) the effective date of a registration statement filed by the Company with the SEC covering the resale of the Shares.

In addition, if the estimated working capital is below $ 90 (“Minimum Working Capital Threshold”), the Purchase Price shall be reduced by the shortfall, though no increase would occur if the working capital exceeds the Minimum Working Capital Threshold.

Additionally, $ 150 of the Cash Purchase Price were wired directly to Evoke to fund post-closing operational expenses (“Operational Expense Amount”), and the Operational Expense Amount shall be excluded from calculating the Closing Working Capital (as defined in the Securities Purchase Agreement), the Minimum Working Capital Threshold, and the Final Closing Statement.

Within 90 days after closing, the Company will provide a final closing statement with the actual figures prepared in good faith.

The transactions contemplated under the Securities Purchase Agreement were closed on May 1, 2025, which were subject to customary closing conditions, including, without limitation, the completion of mutually satisfactory due diligence;

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 a

thirty-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”).

Each Seller agreed not to sell, transfer, or otherwise dispose of any

Shares, or engage in any transaction that would transfer the economic benefits of the Shares during the Lock-Up Period (the “Lock-Up

Period”) without the prior written consent of the Company.

The Lock-Up Period began on the closing date and will end on the earlier

of (a) six months after the closing date or (b) the effective date of a registration statement filed by the Company with the SEC covering

the resale of the Shares.

The Lock-Up Period expired on October 31, 2025.

The transactions contemplated under the Securities Purchase Agreement

were closed on May 1, 2025, which were subject to customary closing conditions, including, without limitation, the completion of mutually

satisfactory due diligence;

compliance with applicable regulatory requirements;

the Company entering into a satisfactory consulting agreement with David W.

the Company entering into a satisfactory consulting agreement

with the former CEO of Evoke;

Evoke having no outstanding debt or liabilities in default;

2 unchanged sentences

The aggregate purchase price was $ 6,221 , which consisted of:

(a) $ 3,000 in cash;

$ 3,000 in cash;

(b) 857,142 shares of Company common stock with an acquisition date fair value of $ 2,743 ;

and (c) a liability associated with the Earn-Out Shares with an acquisition date fair value of $ 478 , subject to the conditions described above.

The Company engaged a third -party independent valuation specialist to assist in the determination of fair values of tangible and intangible assets acquired and liabilities assumed for Evoke.

The final determination of the fair value of assets and liabilities will be completed within the one -year measurement period as required by ASC 805.

The acquisition will necessitate the use of this measurement period to adequately analyze and assess the factors used in establishing the asset and liability fair values as of the relevant acquisition date.

The allocation of the purchase price has been prepared on a preliminary basis and changes to the allocation of certain assets and liabilities may occur as additional information becomes available.

The primary areas of the purchase price that are not yet finalized are related to the valuation of, Developed technologies, Trade names, Non-compete agreements, Customer lists, Deferred revenues, and Goodwill.

and (c) a liability

associated with the Earn-Out Shares with an acquisition date fair value of $ 478 , subject to the conditions described above.

The Company engaged a third-party independent valuation specialist

to assist in the determination of fair values of intangible assets acquired and liabilities assumed for Evoke.

determination of the fair value of assets and liabilities will be completed within the one-year measurement period as required by ASC

The acquisition will necessitate the use of this measurement period to adequately analyze and assess the factors used in establishing

the asset and liability fair values as of the relevant acquisition date.

The allocation of the purchase price has been prepared on a preliminary

basis, and changes to the allocation of certain assets and liabilities may occur as additional information becomes available.

areas of the purchase price that are not yet finalized are related to the valuation of, Developed technologies, Trade names, Non-compete

agreements, Customer lists, Deferred revenues, and Goodwill.

Purchase Price

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Fair Value of Identified Net Assets

In connection with the acquisition of Evoke, the Company acquired intangible assets in the form of developed technology, a trade name and non-compete agreements.

The Company used the relief from royalty method when determining the fair value of the acquired trade name and developed technology.

The fair value was determined by applying an estimated royalty rate to revenues, measuring the value the Company would pay in royalties to a market participant if it did not own the trade name and developed technology and had to license it from a third party.

The trade name was assigned a useful life of 3 years and the internally developed technology was assigned a useful life of 9 years.

The Company used the postulated loss of income method when determining the fair value of the non-compete agreements.

The non-compete agreements were assigned a contractual useful life of 5 years.

Significant assumptions included a discount rate of 15 %, royalty rates of 3.5 % and an assumed income tax rate of 26.5 %.

The fair value of working capital accounts was determined to be their carrying values due to the short-term nature of the assets and liabilities.

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 a three month revenue volatility rate of 1.6 %.

This contingent consideration liability will be remeasured at fair value each reporting period until the contingency is resolved, with changes in fair value recognized in operating expenses.

During the three months ended June 30, 2025, the Company recognized a loss on change in fair value of contingent consideration of $ 3 .

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 a three -month revenue volatility rate of 2.4 %.

The components of working capital are as follows:

In connection with the acquisition of Evoke, the Company acquired

intangible assets in the form of developed technology, a trade name and non-compete agreements.

The Company used the relief from

royalty method when determining the fair value of the acquired trade name and developed technology.

The fair value was determined by

applying an estimated royalty rate to revenues, measuring the value the Company would pay in royalties to a market participant if it

did not own the trade name and developed technology and had to license it from a third party.

The trade name was assigned a useful

life of 3 years as the company is expecting to transition the Evoke system under the Firefly product umbrella.

internally developed technology was assigned a useful life of 9 years .

The Company used the postulated loss of income

method when determining the fair value of the non-compete agreements.

The non-compete agreements were assigned a contractual useful

life of 5 years .

Significant assumptions included a discount rate of 15 %, royalty rates of 3.5 %, and an assumed income tax

rate of 26.5 %.

The fair value of working capital accounts was determined to be their

carrying value due to the short-term nature of the assets and liabilities.

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 a three-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.

the nine months ended September 30, 2025, the Company recognized a loss on change in fair value of contingent consideration of $ 3 .

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 a three-month revenue volatility rate of 2.4 %.

The components of working capital as of the acquisition date are as

Current assets:

7 unchanged sentences

Net working capital

Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and the amount is attributable to the reputation of the business acquired, the workforce in place and the synergies to be achieved from this acquisition.

Goodwill of $ 5,175 from the acquisition of Evoke is not expected to be deductible for income tax purposes.

The condensed consolidated financial statements of the Company include the results of operations of Evoke from April 30, 2025 to June 30, 2025 and do not include results of operations for periods prior to April 30, 2025.

The results of operations of Evoke from April 30, 2025 to June 30, 2025 included revenues of $ 251 and a net loss of $ 12 .

The following table presents the unaudited pro forma condensed consolidated results of operations for the three and six months ended June 30, 2025 and 2024 as if the acquisition of Evoke occurred at the beginning of fiscal year 2024.

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 are not 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 year 2024 or (ii) future results of operations.

For the Three Months Ended

For the Six Months Ended

$ 408 $ 2,474 $ 856 $ 4,867

$ ( 1,857 ) $ ( 452 ) $ ( 15,019 ) $ ( 1,206 )

As of the date of the acquisition, the Company expected to collect all contractual cash flows related to receivables acquired in the acquisition.

Acquisition-related costs of $50 were expensed as incurred and are recorded within general and administrative expenses on the condensed consolidated statements of operations.

Goodwill was recorded based on the amount by which the purchase price

exceeded the fair value of the net assets acquired and the amount is attributable to the reputation of the business acquired, the workforce

in place and the synergies to be achieved from this acquisition.

Goodwill of $ 5,175 from the acquisition of Evoke is not expected

to be deductible for income tax purposes.

The condensed consolidated financial statements of the Company include

the results of operations of Evoke from April 30, 2025 to September 30, 2025 and do not include results of operations for periods prior

to April 30, 2025.

The results of operations of Evoke from April 30, 2025 to September 30, 2025 included revenues of $ 548 and a net

loss of $ 12 .

The following table presents the unaudited pro forma condensed consolidated

results of operations for the three and nine months ended September 30, 2025 and 2024 as if the acquisition of Evoke occurred at

the beginning of fiscal year 2024.

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 are not 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 year 2024 or (ii) future results of operations.

Three Months Ended

Nine Months Ended

September 30,

As of the date of the acquisition, the Company expected to collect

all contractual cash flows related to receivables acquired in the acquisition.

Acquisition-related costs of $50 were expensed as

incurred and are recorded within general and administrative expenses on the condensed consolidated statements of operations.

ACCOUNTS RECEIVABLE

Details of accounts receivable balance is as follows:

September 30,

Accounts receivable

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Details of prepaid expenses balance is as follows:

September 30,

Shares issued for prepaid services

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Details of inventory balance is as follows:

September 30,

Raw Materials

3 unchanged sentences

Equipment balance is as follows:

September 30,

Medical equipment, cost

2 unchanged sentences

Equipment, net

Depreciation expense was $ 10 and $ 19 for the three and six months ended June 30, 2025, respectively.

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

Depreciation expenses were $ 10 and $ 29 for the three and

nine months ended September 30, 2025, respectively.

Medical equipment subject to operating leases includes hardware leased

to customers as part of the Company’s products and services offerings.

INTANGIBLE ASSETS, NET AND GOODWILL

The following tables summarize the composition of intangible assets as of June 30, 2025:

June 30, 2025

Gross Carrying Amount

Accumulated Amortization

Accumulated Impairment

Weighted Average Life

Unamortized intangible assets

The following tables summarize the composition of intangible assets

as of September 30, 2025:

September 30, 2025

Gross Carrying Amount Accumulated Amortization Accumulated Impairment Net Carrying Amount Weighted Average Life

Finite lived intangible assets

BNA software $ 1,109 $ ( 84 ) ( 1,025 ) $ -

Developed technology 700 ( 32 ) -

Trade names 150 ( 21 ) -

Non-compete agreements 110 ( 9 ) -

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December 31, 2024

Gross Carrying Amount

Accumulated Amortization

Accumulated Impairment

Weighted Average Life

Gross Carrying Amount Accumulated Amortization Accumulated Impairment Net Carrying Amount Weighted Average Life

Finite lived intangible assets

BNA software $ 1,109 $ ( 55 ) ( 874 ) $ 180 4.75

Total intangible assets $ 1,109 $ ( 55 ) ( 874 ) $ 180 4.75

Amortization expense was $ 33 and $ 43 for the three and six months ended June 30, 2025, respectively.

The estimated aggregate future amortization expense for intangible assets subject to amortization as of June 30, 2025, is summarized below:

Year ending December 31

Estimated Future Amortization Expense

The following table summarizes the changes in the carrying amount of goodwill for the periods presented:

Balance, beginning of year

Acquired in Evoke business combination.

Balance, end of period

Amortization expense was $ 47 and $ 90 for the three and

nine months ended September 30, 2025, respectively.

During the reporting period, management evaluated the Company’s

capitalized software development costs for indicators of impairment in accordance with ASC 350-40, Internal-Use Software.

The review was

prompted by a change in strategic direction resulting from the acquisition of Evoke Neuroscience and its hardware offering.

Accordingly, the Company recognized an impairment loss of $ 152 during

the period ended September 30, 2025.

This charge was recorded within “Impairment of intangible assets” on the statement of

operations, reducing the carrying value of the software asset to $ nil .

The estimated aggregate future amortization expense for intangible

assets subject to amortization as of September 30, 2025, is summarized below:

Future Amortization Expense

2029 and therafter

CONVERTIBLE PROMISSORY NOTE

December 20, 2024, the Company issued a convertible promissory note of

$ 2,400 and warrants to purchase up to

800,000 shares of common stock at an exercise price of

$ 4.00 per share (“Convertible Promissory Note Warrants”).

The note included a discount of

$ 360 , and the Company received gross proceeds of

The note is convertible at

$ 3.00 per share, subject to adjustments (“Conversion Option”).

The principal amount of

$ 2,400 was scheduled to mature and become due and payable on

December 20, 2025.

The Company bifurcated the Conversion Option and accounted for it as a derivative liability due to the conversion feature

not being clearly and closely related to the economic characteristics of the host contract.

February 13, 2025, the convertible promissory note was converted to

800,000 shares of common stock at the conversion price of

$ 3.00 per share.

The derivative liability was recorded at its estimated fair value prior to its derecognition upon conversion of the associated convertible promissory notes, resulting in a loss of

The derecognition of the Conversion Option and host contract on

February 13, 2025, and the corresponding issuance of

800,000 shares of common stock at a fair value of

$ 12,368 resulted in an additional loss of

$ 1,353 on the consolidated statement of operations for the

six months ended

June 30, 2025.

The Company incurred

$ 29 in transaction costs relating to the exercise of the conversion option.

On December 20, 2024, the Company issued a convertible promissory note

of $ 2,400 and warrants to purchase up to 800,000 shares of common stock at an exercise price of $ 4.00 per share (“Convertible Promissory

Note Warrants”).

The note included a discount of $ 360 , and the Company received gross proceeds of $ 2,040 .

The note is convertible

at $ 3.00 per share, subject to adjustments (“Conversion Option”).

The principal amount of $ 2,400 was scheduled to mature and

become due and payable on December 20, 2025.

The Company bifurcated the Conversion Option and accounted for it as a derivative liability

due to the conversion feature not being clearly and closely related to the economic characteristics of the host contract.

13, 2025, the convertible promissory note was converted to 800,000 shares of common stock at the conversion price of $ 3.00 per share.

The derivative liability was recorded at its estimated fair value prior to its derecognition upon conversion of the associated convertible

promissory notes, resulting in a loss of $ 9,369 .

The derecognition of the Conversion Option and host contract on February 13, 2025, and

the corresponding issuance of 800,000 shares of common stock at a fair value of $ 12,368 resulted in an additional loss of $ 1,353 on

the consolidated statement of operations for the nine months ended September 30, 2025.

The Company incurred $ 29 in transaction costs relating

to the exercise of the conversion option.

The following table summarizes the amortized cost portion of the convertible promissory note:

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Settlement via conversion

Balance at June 30, 2025

The following table summarizes the fair value changes of the Conversion Option:

Balance at September 30, 2025

The following table summarizes the fair value changes of the Conversion

Balance at December 31, 2023

4 unchanged sentences

Settlement via conversion

Balance at June 30, 2025

Balance at September 30, 2025

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 Section 14 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 Section 14 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 $ 11 and $ 22 for the three and six months ended June 30, 2025, respectively, and $ 6 and $ 22 for the three and six months ended June 30, 2024, respectively.

Israeli labor law requires payment of severance pay upon dismissal

of an employee or upon termination of employment in certain circumstances.

Pursuant to Section 14 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 Section 14 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 $ 12 and $ 33 for the three and nine months ended September 30, 2025, respectively, and $ 10 and $ 35 for

the three and nine months ended September 30, 2024, respectively.

COMMITMENTS AND CONTINGENCIES

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, 2024 through June 30, 2025.

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 is not obligated to pay any royalty.

The Company cannot reasonably determine the outcome of the commercialization of the technology and considers the liability to be contingent upon generation of sales, hence no liability has been recognized as of June 30, 2025, and December 31, 2024.

The contingent liability amounts to $ 5,782 and $ 5,833 for June 30, 2025, and December 31, 2024 respectively.

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

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, 2024 through September 30, 2025.

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 is not obligated to pay any

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, hence no liability has been recognized as of September

30, 2025, and December 31, 2024.

The contingent liability amounts to $ 5,809 and $ 5,833 for September 30, 2025, and December

31, 2024 respectively.

Sale of the technology developed utilizing the grants from IIA is restricted

and is subject to IIA’s approval.

Equity Line of Credit

On December 20, 2024, the Company entered into an equity line of credit agreement with an investor (the “Purchase Agreement”), allowing the Company to direct the investor purchase up to $ 10,000 in shares of common stock, subject to certain conditions, including filing a registration statement with the U.S.

Securities and Exchange Commission (“SEC”).

The Company has the right to submit an advance notice for the lower of (i) an amount equal to 40 % of the average of the Daily Value Traded (as defined in the Purchase Agreement) of common stock on the five trading days immediately preceding an advance notice, or (ii) $ 2,000 .

The purchase price will be 88 % of the daily VWAP on the trading day commencing on the date of the advance notice.

In connection with the Purchase Agreement, the Company has paid a $ 300 commitment fee and recorded within non-current prepaid expenses and deposits.

The Company incurred $ 36 of deferred offering costs associated with the Purchase Agreement and recorded within non-current prepaid expenses and deposits.

Both the commitment fee and deferred offering costs will be charged against the gross proceeds of future sales of shares of common stock under the Purchase Agreement.

The Company may not issue shares to the counterparty if it would result in the counterparty owning more than 9.99 % of the outstanding shares of common stock.

As of June 30, 2025, the Company did not issue any shares pursuant to the Purchase Agreement.

On December 20, 2024, the Company entered into an equity line of credit

agreement with an investor (the “Purchase Agreement”), allowing the Company to direct the investor purchase up to $ 10,000

in shares of common stock, subject to certain conditions, including filing a registration statement with the U.S.

Securities and Exchange

Commission (“SEC”).

In connection with the Purchase Agreement, the Company paid a $ 300 commitment fee and incurred $ 97 of

deferred offering costs.

The commitment fee and deferred offering costs were recorded within current prepaid expenses and deposits.

On September 4, 2025, the Company sent notification for termination

of the Purchase Agreement and as such expensed the commitment fee and deferred offering costs.

There were no sales of stock under the

Purchase Agreement.

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 is not aware of any currently pending litigation for which it believes the outcome could have a material adverse effect on its operations or financial position.

On February 13, 2025, convertible promissory note (Note 10 ) was converted to 800,000 shares of common stock at the conversion price of $ 3.00 per share.

Transaction costs incurred of $ 39 relating to the exercise of the conversion option are offset within additional paid-in capital.

On March 28, 2025, the Company entered into a private placement transaction (the “March 2025 Units Offering”), pursuant to which the Company agreed to issue and sell (i) 547,737 shares of common stock and (ii) warrants (the “PIPE 2025 warrants”) to purchase up to 547,737 shares of common stock, at a combined purchase price of $ 3.00 per unit.

Each warrant entitles the purchasers to acquire one share of common stock at a price of $ 4.00 per share for a period of three years from the date of issue.

The Company issued broker warrants to purchase up to 25,958 shares of common stock to the associated broker in connection with the offering.

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 is not aware of any currently pending litigation

for which it believes the outcome could have a material adverse effect on its operations or financial position.

On February 13, 2025, convertible promissory note (Note 10) was converted

to 800,000 shares of common stock at the conversion price of $ 3.00 per share.

Transaction costs incurred of $ 39 relating to

the exercise of the conversion option are offset within additional paid-in capital.

On March 28, 2025, the Company entered into a private placement transaction

(the “March 2025 Units Offering”), pursuant to which the Company agreed to issue and sell (i) 547,737 shares of common stock

and (ii) warrants (the “PIPE 2025 warrants”) to purchase up to 547,737 shares of common stock, at a combined purchase price

of $ 3.00 per unit.

Each warrant entitles the purchasers to acquire one share of common stock at a price of $ 4.00 per share for a period

of three years from the date of issue.

The Company issued broker warrants to purchase up to 25,958 shares of common stock to the associated

broker in connection with the offering.

The aggregate gross proceeds from the March 2025 Units Offering were $ 1,643 .

The Company incurred $ 179 of costs associated with the issuance.

The PIPE 2025 warrants and related broker warrants are equity classified instruments and are recorded as equity.

On April 28, 2025, the Company issued 340,000 shares of common stock pursuant to the Inducement Agreement (Note 13.b ).

On April 30, 2025, the Company issued 857,142 shares of common stock for the acquisition of Evoke (Note 4 ).

The Company incurred

$ 179 of costs associated with the issuance.

The PIPE 2025 warrants and related broker warrants are equity classified instruments

and are recorded as equity.

On April 28, 2025, the Company issued 340,000 shares of common stock

pursuant to the Inducement Agreement (Note 13.b).

On April 30, 2025, the Company issued 857,142 shares

of common stock for the acquisition of Evoke (Note 4).

The shares were measured at fair value at $ 3.20 per share.

On June 16, 2025, the Company entered into a securities purchase agreement with certain accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell 400,000 units (each, a “Unit” and collectively, the “Units”) at a purchase price of $ 3.00 per Unit, for aggregate gross proceeds of $ 1,200 .

Each Unit consists of (i) either (A) one share of common stock or (B) a prefunded warrant to purchase one share of common stock (the “Pre-Funded Warrant”) at a nominal exercise price of $ 0.0001 per share, (ii) one common stock purchase warrant (the “$3.50 Warrant”) to purchase one share of common stock at an exercise price of $ 3.50 per share, exercisable for five years, and (iii) one common stock purchase warrant (the “$4.00 Warrant,” and together with the Pre-Funded Warrants and $3.50 Warrants, the “Warrants”) to purchase one share of common stock at an exercise price of $ 4.00 per share, also exercisable for five years.

The Company issued 400,000 Units to the Investors, consisting of 340,000 shares of common stock, 60,000 Pre-Funded Warrants, 400,000 $3.50 Warrants, and 400,000 $4.00 Warrants.

The following table summarizes the Company’s warrant activity for the six months ended June 30, 2025:

Number of Warrants

Weighted Average Exercise Price

Weighted Average Remaining Life (Years)

On June 16, 2025, the Company entered into a securities purchase agreement

with certain accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell 400,000 units

(each, a “Unit” and collectively, the “Units”) at a purchase price of $ 3.00 per Unit, for aggregate gross proceeds

Each Unit consists of (i) either (A) one share of common stock or (B) a prefunded warrant to purchase one share of common stock

(the “Pre-Funded Warrant”) at a nominal exercise price of $ 0.0001 per share, (ii) one common stock purchase warrant (the “$3.50

Warrant”) to purchase one share of common stock at an exercise price of $ 3.50 per share, exercisable for five years , and (iii) one

common stock purchase warrant (the “$4.00 Warrant,” and together with the Pre-Funded Warrants and $3.50 Warrants, the “Warrants”)

to purchase one share of common stock at an exercise price of $ 4.00 per share, also exercisable for five years .

The Company issued 400,000

Units to the Investors, consisting of 340,000 shares of common stock, 60,000 Pre-Funded Warrants, 400,000 $3.50 Warrants, and 400,000

$4.00 Warrants.

The following table summarizes the Company’s warrant activity

for the nine months ended September 30, 2025:

Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Life (Years)

Outstanding warrants, January 1, 2025 1,971,216 $ 11.54 4.30

1,971,216 $ 11.54 4.30

PIPE 2025 warrants 547,737 4

3 unchanged sentences

Exercised ( 1,623,530 ) 5.43

Outstanding warrants, June 30, 2025

1,721,381 $ 11.16 3.48

During the six months ended June 30, 2025, the Company entered into a warrant inducement agreement (the “Inducement Agreement”) with holders (“PIPE 2024 warrant holders”) of the Company's existing warrants (“PIPE 2024 warrants”).

Pursuant to the Inducement Agreement, PIPE 2024 warrant holders agreed to exercise for cash PIPE 2024 warrants to purchase up to 823,529 shares of common stock at an exercise price of $ 6.83 .

On February 12, 2025, PIPE 2024 warrants were exercised in full for cash proceeds of $ 5,625 .

The Company recorded a deemed dividend of $ 4,410 in relation to the Inducement Agreement as it is considered an inducement offer to exercise the PIPE 2024 warrants.

The fair value of a deemed dividend is estimated based on the fair value of the underlying share of common stock on the warrant exercise date.

On April 28, 2025, the Company issued 340,000 shares of its common stock pursuant to the Inducement Agreement.

Further, the Company received proceeds of $ 3,200 from the exercise of Convertible Promissory Note Warrants (Note 10 ).

Warrants Expired ( 20,643 ) 28.85

Outstanding warrants, September 30, 2025 1,700,738 $ 10.95 3.45

During the nine months ended September 30, 2025, the Company entered

into a warrant inducement agreement (the “Inducement Agreement”) with holders (“PIPE 2024 warrant holders”) of

the Company’s existing warrants (“PIPE 2024 warrants”).

Pursuant to the Inducement Agreement, PIPE 2024 warrant holders agreed

to exercise for cash PIPE 2024 warrants to purchase up to 823,529 shares of common stock at an exercise price of $ 6.83 .

On February 12,

2025, PIPE 2024 warrants were exercised in full for cash proceeds of $ 5,625 .

The Company recorded a deemed dividend of $ 4,410 in relation

to the Inducement Agreement as it is considered an inducement offer to exercise the PIPE 2024 warrants.

The fair value of a deemed dividend

is estimated based on the fair value of the underlying share of common stock on the warrant exercise date.

On April 28, 2025, the Company

issued 340,000 shares of its common stock pursuant to the Inducement Agreement.

Further, the Company received proceeds of $ 3,200 from the exercise

of Convertible Promissory Note Warrants (Note 10).

Warrants exercisable for little or no consideration

Warrants exercisable for little or no consideration are fully vested warrants that allows 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 the six months ended June 30, 2025:

Number of Warrants

Weighted Average Remaining Life (Years)

Warrants exercisable for little or no 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 the nine months ended September 30, 2025:

Number of Warrants Weighted Average Remaining Life (Years)

Outstanding warrants, January 1, 2025 699,546 3.22

Pre-Funded Warrants (Note 13.a) 60,000

Outstanding warrants, June 30, 2025

Exercised ( 757,903 )

Expired ( 1,643 )

Outstanding warrants, September 30, 2025 -

Employees stock option plan

A summary of option activity under the Company's equity incentive plan as of June 30, 2025, and changes during the period then ended is presented below.

Number of Stock Options

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (Years)

Aggregate Intrinsic Value

A summary of option activity under the Company’s equity incentive plan as

of September 30, 2025, and changes during the period then ended is presented below.

Number of Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value

Outstanding Options, December 31, 2024 470,061 $ 9.64 3.97 $ -

470,061 $ 9.64 3.97 $ -

Options granted 15,000 3.12 - -

15,000 3.12 - -

Options forfeited ( 127,720 ) 13.27 - -

( 108,792 ) 15.58 - -

Outstanding Options, June 30, 2025

376,269 $ 7.66 3.39 $ -

The share-based compensation expense related to options for the three and six months ended June 30, 2025 was $( 43 ) and $ 43 , respectively, and $ 58 and $ 148 for the three and six months ended June 30, 2024, respectively.

The fair value of options granted for the six months ended June 30, 2025 and 2024, was $ 34 and $nil, respectively.

The intrinsic value of the options outstanding as of June 30, 2025, is $nil ( December 31, 2024:

The fair value of each option award is estimated on the date of grant using a Black Scholes pricing option valuation model that uses the assumptions noted in the following table.

Outstanding Options, September 30, 2025 357,341 $ 8.07 3.03 $ -

The share-based compensation expense related to options for the

three and nine months ended September 30, 2025 was $ 35 and $ 77 , respectively, and $ 1,296 and $ 1,314 for the three and nine months

ended September 30, 2024, respectively.

The fair value of options granted for the nine months ended September 30, 2025 and 2024, was

$ 34 and $ 1,600 , respectively.

The intrinsic value of the options outstanding as of September 30, 2025 is $ nil (December 31, 2024:

The fair value of each option award is estimated on the date of grant

using a Black Scholes pricing option valuation model that uses the assumptions noted in the following table.

Risk free rate 3.98 %

2 unchanged sentences

Expected term (in years) 3.12

A summary of the Company’s nonvested options as of June 30, 2025, and changes during the six months period ended, is presented below.

A summary of the Company’s nonvested options as of September

30, 2025, and changes during the nine-month period ended, is presented below.

Number of Stock Options

1 unchanged sentence

Non-Vested Options, December 31, 2024

206,427 $ 4.56

Options granted

Options vested

( 57,644 ) 4.59

Options forfeited

Non-Vested Options, June 30, 2025

123,017 $ 3.81

As of June 30, 2025, there was $ 119 of total unrecognized compensation cost related to nonvested options granted to be recognized over the next 1.75 years.

Non-Vested Options, September 30, 2025

As of September 30, 2025, there was $ 91 of total unrecognized compensation

cost related to nonvested options granted to be recognized over the next 1.5 years.

Restricted share units (“RSUs”)

A summary of RSU activity under the Company's equity incentive plan as of June 30, 2025, and changes during the period then ended is presented below.

A summary of RSU activity under the Company’s equity incentive

plan as of September 30, 2025, and changes during the period ended is presented below.

Number of Stock RSUs

2 unchanged sentences

RSUs exercised

Outstanding, June 30, 2025

311,194 $ 881

The share-based compensation expense related to RSUs for the three and six months ended June 30, 2025 was $ 70 and $ 71 , respectively, and $ni l for the three and six months ended June 30, 2024, respectively.

The fair value of RSUs granted for the six months ended June 30, 2025, and 2024, was $ 1,051 and $nil, respectively.

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

A summary of the Company’s nonvested RSUs as of June 30, 2025, and changes during the six months period ended, is presented below.

Number of Stock RSUs

Weighted Average Grant-Date Fair Value

Outstanding, September 30, 2025

The share-based compensation expense related to RSUs for the

three and nine months ended September 30, 2025 was $ 139 and $ 210 , respectively, and $ nil for the three and nine months

ended September 30, 2024, respectively.

The fair value of RSUs granted for the nine months ended September 30, 2025, and 2024,

was $ 1,478 and $ nil , 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 September 30,

2025, and changes during the nine-month period ended, is presented below.

Non-vested RSUs, December 31, 2024

( 28,745 ) 3.09

Non-vested RSUs, June 30, 2025

311,194 $ 3.09

As of June 30, 2025, there was $ 980 of total unrecognized compensation cost related to nonvested RSUs granted.

Non-vested RSUs, September 30, 2025

As of September 30, 2025, there was $ 1,268 of total unrecognized

compensation cost related to nonvested RSUs granted.

That cost is expected to be recognized over a weighted average period of 2.63 years.

Deferred stock units (“DSUs”)

A summary of DSU activity under the Company's equity incentive plan as of June 30, 2025, and changes during the period then ended is presented below.

A summary of DSU activity under the Company’s equity incentive

plan as of September 30, 2025, and changes during the period ended, is presented below.

Number of Deferred Stock Units

1 unchanged sentence

Outstanding DSUs, December 31, 2024

Outstanding DSUs, June 30, 2025

The share-based compensation expense related to DSUs for the three and six months ended June 30, 2025 was $ 50 and $ 167 , respectively, and $nil for the three and six months ended June 30, 2024, respectively.

The fair value of DSUs granted for the six months ended June 30, 2025, and 2024, was $ 209 and $nil, respectively.

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

A summary of the Company’s nonvested DSUs as of June 30, 2025, and changes during the six months period ended, is presented below.

Outstanding DSUs, September 30, 2025

The share-based compensation expense related to DSUs for the three

and nine months ended September 30, 2025 was $ 41 and $ 210 , respectively, and $ nil for the three and nine months ended September

30, 2024, respectively.

The fair value of DSUs granted for the nine months ended September 30, 2025, and 2024, was $ 210 and $ nil , respectively.

The fair value of each DSU is estimated based on the grant-date

fair value of the underlying share of common stock.

summary of the Company’s nonvested DSUs as of September 30, 2025, and changes during the nine-month period ended, is presented

Number of Stock RSUs

1 unchanged sentence

Non-vested DSUs, December 31, 2024

( 50,000 ) 3.12

Non-vested DSUs, June 30, 2025

16,668 $ 3.12

As of June 30, 2025, there was $ 41 of total unrecognized compensation cost related to nonvested DSUs granted.

That cost is expected to be recognized over a weighted-average period of 0.25 years.

Non-vested DSUs, September 30, 2025

As of September 30, 2025, there was $ nil of total unrecognized

compensation cost related to nonvested DSUs granted.

The costs have been recognized as of September 30, 2025.

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 or no consideration in relation to the share price.

Shares of common stock that were issued and are subject to vesting conditions are not 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 June 30, 2025, 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 the three and six months ended June 30, 2025, or 2024, 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:

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 or no consideration in relation to the share

Shares of common stock that were issued and are subject to vesting conditions are not 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 September 30,

2025, potential dilutive shares of common stock consist of shares issuable upon exercise of stock options, warrants, RSUs and DSUs.

adjustments have been made to the weighted average outstanding shares of common stock figures for the three and nine months ended September

30, 2025, or 2024, 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:

Warrants (Note 13.b)

3 unchanged sentences

Shares issuable pursuant to Series C Preferred Stock

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 the two -class method.

The net loss available to common stockholders was adjusted by the deemed dividend associated with the Inducement Agreement (Note 13.b ).

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 the two-class method.

The net loss available to common stockholders was adjusted by the deemed dividend associated

with the Inducement Agreement (Note 13.b).

Three Months Ended

Six months ended

Nine Months Ended

September 30,

Type of goods and services

3 unchanged sentences

Point in time

Six months ended

Nine Months Ended

September 30,

Deferred revenue - beginning of period

7 unchanged sentences

The Company derives revenue primarily in North America and manages the business activities on a consolidated basis.

The technology used in the customer arrangements is based on a single software platform that is deployed to and implemented by customers in a similar manner.

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 does not 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.

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.

SUBSEQUENT EVENT

On October 28, 2025, the Company issued DSUs representing 172,416 shares

of its common stock to its directors with service-based vesting conditions.

The service-based vesting condition for these awards are satisfied

The grant date fair value of the RSUs issued on October 28, 2025 was approximately $ 331 .

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-Q

Item 1. Financial Statements