What changed in this filing

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Item 1. Financial Statements

2024-08-19 compared with 2024-05-14 · 241 added, 130 removed, 369 unchanged (50% of the section changed)

Financial Statements

WAVEDANCER, INC.

FIREFLY NEUROSCIENCE, INC.

(formerly WaveDancer, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2024

June 30, 2024

December 31, 2023

(unaudited) (audited)

Current assets

41 unchanged sentences

Common stock, $ 0.0001 par value 100,000,000 shares authorized;

2,180,485 shares issued, 2,013,180 shares outstanding as of March 31, 2024 and December 31, 2023

726,829 shares issued, 671,060 shares outstanding as of June 30, 2024 and December 31, 2023

Additional paid-in capital

2 unchanged sentences

( 34,288,883 ) ( 33,225,236 )

Treasury stock, 167,305 shares at cost, as of March 31, 2024 and December 31, 2023

Treasury stock, 55,768 shares at cost, as of June 30, 2024 and December 31, 2023

( 965,211 ) ( 965,211 )

4 unchanged sentences

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

WaveDancer, Inc.

Form 10-Q March 31, 2024

WAVEDANCER, INC.

Form 10-Q June 30, 2024

FIREFLY NEUROSCIENCE, INC.

(formerly WaveDancer, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30,

Professional fees

Software sales

Total revenues

Total revenues, net

Cost of revenues

3 unchanged sentences

Selling, general and administrative expenses

Gain on Settlement of litigation

Operating (loss) income from continuing operations

Other income, net

Interest expense

(Loss) income from continuing operations before income taxes and equity in net loss of affiliate

Provision for income taxes

Net (loss) income from continuing operations before equity in net loss of affiliate

Equity in net loss of affiliate

Net (loss) income

Basic (loss) earnings per share

Diluted (loss) earnings per share

Weighted average common shares outstanding

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

Form 10-Q June 30, 2024

FIREFLY NEUROSCIENCE, INC.

(formerly WaveDancer, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months Ended June 30,

Professional fees

Software sales

Total revenues, net

Cost of revenues

Cost of professional fees

Cost of software sales

Total cost of revenues excluding depreciation and amortization

Selling, general and administrative expenses

Gain on litigation settlement

Operating loss from continuing operations

Gain on lease termination

Other income, net

12 unchanged sentences

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

WaveDancer, Inc.

Form 10-Q March 31, 2024

WAVEDANCER, INC.

Form 10-Q June 30, 2024

FIREFLY NEUROSCIENCE, INC.

(formerly WaveDancer, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

6 unchanged sentences

Gain on lease termination

Gain on litigation settlement

Equity in loss of affiliate

14 unchanged sentences

Cash flows from financing activities

Borrowings under revolving line of credit

(Repayments) borrowings under revolving line of credit

Premium financing borrowings

2 unchanged sentences

Proceeds from exercise of stock options

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net cash (used in) provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

5 unchanged sentences

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

WaveDancer, Inc.

Form 10-Q March 31, 2024

WAVEDANCER, INC.

Form 10-Q June 30, 2024

FIREFLY NEUROSCIENCE, INC.

(formerly WaveDancer, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY

Balances at December 31, 2023

2,180,485 $ 2,180 $ 36,456,957 $ ( 33,225,236 ) $ ( 965,211 ) $ 2,268,690

- - - ( 673,950 ) - ( 673,950 )

Stock option compensation

- - 113,780 - - 113,780

Balances at March 31, 2024

2,180,485 $ 2,180 $ 36,570,737 $ ( 33,899,186 ) $ ( 965,211 ) $ 1,708,520

Stock option compensation

Balances at June 30, 2024

Balances at December 31, 2022

2,083,860 $ 2,084 $ 35,883,831 $ ( 31,190,801 ) $ ( 965,211 ) $ 3,729,903

- - - ( 1,349,952 ) - ( 1,349,952 )

Stock option compensation

- - 353,658 - - 353,658

Forfeiture of stock options on disposal of business (Note 2)

( 407,322 ) ( 407,322 )

7,429 7 37,624 37,631

Amortization of stock issue costs

Issuance of stock from exercise of options

2,000 2 7,398 - - 7,400

Balances at March 31, 2023

2,093,289 $ 2,093 $ 35,875,189 $ ( 32,540,753 ) $ ( 965,211 ) $ 2,371,318

Stock option compensation

Amortization of stock issue costs

Balances at June 30, 2023

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

WaveDancer, Inc.

Form 10-Q March 31, 2024

WAVEDANCER, INC.

Form 10-Q June 30, 2024

FIREFLY NEUROSCIENCE, INC.

(formerly WaveDancer, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 unchanged sentences

(“WaveDancer” or the “Company”) and converted from a Virginia corporation to a Delaware corporation in December 2021.

The Company is in the business of developing and maintaining information technology (“IT”) systems, modernizing client information systems, and performing other IT-related professional services to government and commercial organizations.

The Company was historically in the business of developing and maintaining information technology (“IT”) systems, modernizing client information systems, and performing other IT-related professional services to government and commercial organizations.

On March 17, 2023, the Company sold effectively 75.1 % of the equity of its Gray Matters, Inc.

7 unchanged sentences

Following the sale of GMI, which comprised all of the material operations of the Blockchain SCM segment, it was presented as a discontinued operation (see Note 2 ), and the Blockchain SCM segment ceased to exist.

After March 17, 2023, the Company manages its business as one reportable operating segment.

After March 17, 2023, the Company managed its business as one reportable operating segment.

In connection with and prior to the consummation of the Merger (as defined and further described below), pursuant to the previously announced Stock Purchase Agreement, dated as of November 15, 2023, by and among the Company, Wavetop Solutions, Inc.

(“Wavetop”) and Tellenger, Inc.

(“Tellenger”), Wavetop purchased from the Company all of the issued and outstanding shares of common stock, par value $ 1.00 per share, of Tellenger prior to the merger, for an aggregate purchase price of $ 1.5 million, plus the assumption of the employment agreements that WaveDancer was obligated under with G.

James Benoit, Jr., Gwen Pal and Stan Reese, which included provisions to pay severance under certain circumstances.

The purchase price was paid in full in cash less the outstanding balance of WaveDancer’s $ 500,000 credit facility with Summit Commercial Bank, N.A.

The balance of the credit facility at SCB was paid in full concurrent with the close of the Merger.

Agreement and Plan of Merger

On August 12, 2024, pursuant to the previously announced Agreement and Plan of Merger, dated as of November 15, 2023 ( as amended by that certain Amendment No.

1, dated as of January 12, 2024, and that certain Amendment No.

2, dated as of June 17, 2024, “Merger Agreement”), by and among the Company, its wholly owned subsidiary, FFN Merger Sub, Inc., a Delaware corporation (“FFN”), and Firefly Neuroscience 2023, Inc., a Delaware corporation (formerly known as Firefly Neuroscience, Inc., “Firefly 2023” ), FFN merged with and into Firefly 2023, with Firefly 2023 surviving as a wholly owned subsidiary of Firefly (the “Merger”).

At the effective time of the Merger (the Closing”), each holder of outstanding shares of Firefly 2023’s common stock, par value $ 0.00001 per share (the “Firefly 2023 Common Stock”) received the number of shares of common stock, par value $ 0.0001 per share, of the Company (the “New Firefly Common Stock”) equal to the number of shares of Firefly 2023 Common Stock such stockholders held multiplied by the exchange ratio, or an aggregate of 7,870,251 shares of Firefly common stock at Closing using an exchange ratio (the “Exchange Ratio”) of 0.1040 .

Additionally, upon at the effective time of the Merger:

(i) each outstanding option to purchase Firefly 2023 Common Stock that was not exercised prior to the Closing was assumed by the Company subject to certain terms contained in the Merger Agreement and became an option to purchase shares of New Firefly Common Stock, subject to adjustment to give effect to the Exchange Ratio, (ii) each outstanding Firefly 2023 restricted share unit outstanding immediately prior to the Closing was accelerated and vested pursuant to the terms thereof, and (iii) each outstanding warrant to purchase shares of Firefly 2023 Common Stock that was not exercised prior to the Closing was assumed by the Company, subject to certain terms contained in the Merger Agreement.

Immediately prior to the Closing of the Merger, on August 12, 2024, ( i) (A) pursuant to the Amended and Restated Certificate of Incorporation of WaveDancer, Inc., WaveDancer changed its name to Firefly Neuroscience, Inc., and (B) pursuant to an amendment to its Certificate of Incorporation, Firefly 2023 changed its name to Firefly Neuroscience 2023, Inc.

and (ii) Firefly effected a reverse stock split of all of the then issued and outstanding shares of Firefly’s common stock (“Firefly Common Stock) at a ratio of 1 -for- 3 (“Merger Reverse Stock Split”).

As a result of the Merger Reverse Stock Split, every three ( 3 ) shares of the then issued and outstanding Firefly Common Stock were automatically combined into one ( 1 ) issued and outstanding share of Firefly Common Stock, without any change in the par value per share or the number of authorized shares of common stock.

Following the Closing, there are 7,870,251 shares of New Firefly Common Stock outstanding, with former Firefly 2023 stockholders owning approximately 92 % and former Firefly stockholders owning 8 % of the Company’s outstanding securities.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

Following the consummation of the Merger (as defined below), the business of Firefly 2023 became the business of the Company, as described below.

Firefly Business

Firefly is an Artificial Intelligence (“AI”) technology company developing innovative neuroscientific solutions that improve outcomes for patients with mental illnesses and neurological disorders.

Its FDA- 510 (k) cleared Brain Network Analytics software platform (the “BNA Platform”) and is focused on advancing diagnostic and treatment approaches for people suffering from mental illnesses and cognitive disorders, including depression, dementia, anxiety disorders, concussions, and attention-deficit/hyperactivity disorder.

Liquidity and Going Concern

During the three months ended March 31, 2024 , the Company generated an operating loss from continuing operations of $ 673,971 .

As of March 31, 2024 , the Company had a net working capital deficit of $ 480,073 including cash and cash equivalents of $ 563,324 .

During the six months ended June 30, 2024 , the Company generated an operating loss from continuing operations of $ 1,056,041 .

As of June 30, 2024 , the Company had a net working capital deficit of $ 746,040 including cash and cash equivalents of $ 244,137 .

Under existing operating conditions, we estimate that over the twelve months from the date of these financial statements our operating activities may use as much as $ 1.0 million to $ 1.5 million of cash, including the satisfaction of all existing liabilities.

The Company's line of credit balance as of March 31, 2024 was $ 500,000 , has no additional borrowing capacity, and expires on May 16, 2024.

On November 15, 2023, the Company entered into a merger agreement with Firefly Neuroscience, Inc.

(“Firefly”), a privately held, commercial-stage, medical technology company, to combine the companies in an all-stock transaction (the "Merger").

The closing of the transaction requires the approval of WaveDancer and Firefly shareholders, both of which have been obtained, as well as the satisfaction of other closing conditions, as discussed more fully below in "Management's Discussion and Analysis of Financial Condition and Results of Operations".

The Merger agreement provides that in connection with the closing of the Merger, WaveDancer will sell its Tellenger subsidiary, the entity through which WaveDancer operates its current revenue-generating business, to WaveTop Solutions, Inc., a company owned and controlled by WaveDancer's chairman and chief executive officer.

Upon closing of the Merger, the combined company will focus on continuing to develop and commercialize Firefly’s Artificial Intelligence driven Brain Network Analytics (BNA™) platform, which was previously cleared by the U.S.

Food and Drug Administration.

The Merger is expected to close in late May or early June 2024.

The Company is seeking a short-term extension of its line of credit from the lender to allow for additional time to close the Merger transaction, upon which the lender will be repaid in full.

In the absence of an extension, the Company and FireFly are considering options to prevent or resolve the issues arising from a default.

The Company's line of credit balance as of June 30, 2024 , was $ 300,000 , had no additional borrowing capacity, and expired on July 16, 2024.

These factors raise substantial doubt about our ability to continue as a going concern for at least the next twelve months from the date of filing.

The business of Firefly 2023 had negative cash flow from operating activities for the six months ended June 30, 2024 and 2023, as disclosed in the Company's Current Report on Form 8 -K filed August 14, 2024.

Further, Firefly 2023 has had recurring losses with minimal revenue from operations.

While the Company is attempting to raise funds for commercialization, Firefly 2023's monthly cash requirements during the six months ended June 30, 2024 had been met through issuance of shares to new and existing shareholders.

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 normal course of business.

To strengthen the Company’s liquidity in the foreseeable future, the Company has taken the following measures:

Negotiating further funding with existing and new investors to raise additional capital;

Taking various cost control measures to reduce the operational cash burn;

Commercializing product to generate recurring sales.

Management of the Company has a reasonable expectation that the Company can continue raising additional equity capital to continue in operational existence for the foreseeable future.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business.

1 unchanged sentence

The Company’s unaudited condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

WaveDancer, Inc.

Form 10 -Q March 31, 2024

Reverse Stock Split

On October 18, 2023, the Company effected a reverse stock split of its common stock, par value $ 0.001 per share, (the “Common Stock”) at a ratio of one -for- ten (the “Reverse Stock Split”).

The Reverse Stock split affected all issued common stock and options and warrants to acquire common stock.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

Reverse Stock Splits

On August 12, 2024, in connection with the Merger, the Company effected the Merger Reverse Stock Split.

The Merger Reverse Stock Split affected all issued common stock and options and warrants to acquire common stock.

No fractional shares were issued as a result of the reverse split and any fractional share otherwise issuable were rounded up to the nearest whole number.

All shares and per share amounts in the condensed consolidated financial statements and accompanying notes have been retroactively adjusted to give effect to the Reverse Stock Split.

Following the Reverse Stock Split, the Company’s issued and outstanding shares of Common Stock decreased from 19,809,834 pre-split shares to approximately 1,980,983 post-split shares, before finalizing the rounding of fractional shares.

As a result of the Reverse Stock Split, the exercise prices of the outstanding options and warrants were increased by a factor of ten.

Certain amounts presented in the 2023 unaudited condensed consolidated financial statements, including common stock, additional paid-in capital, and shares and per share data have been retroactively adjusted for the reverse stock split to conform to the current period financial statement presentation.

All shares and per share amounts in the condensed consolidated financial statements and accompanying notes have been retroactively adjusted to give effect to the Merger Reverse Stock Split.

Following the Merger Reverse Stock Split, the Company’s issued and outstanding shares of Common Stock decreased from 2,180,485 issued and 2,013,180 outstanding pre-split shares, respectively, to approximately 729,829 issued and 671,060 outstanding post-split shares, before finalizing the rounding of fractional shares.

As a result of the Merger Reverse Stock Split, the exercise prices of the outstanding options and warrants were increased by a factor of three.

Certain amounts presented in the 2023 unaudited condensed consolidated financial statements, including common stock, additional paid-in capital, and shares and per share data have been retroactively adjusted for the Merger Reverse Stock Split and the Reverse Stock Split to conform to the current period financial statement presentation.

Unaudited Interim Condensed Consolidated Financial Statements

6 unchanged sentences

The results of operations for any interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

The unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2024 include the accounts of WaveDancer and its condensed consolidated subsidiaries (collectively, the “Company”, “we” or “our”).

The unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2024 , include the accounts of WaveDancer and its condensed consolidated subsidiaries (collectively, the “Company”, “we” or “our”).

All significant intercompany transactions and balances have been eliminated in consolidation.

There have been no changes in the Company’s significant accounting policies as of March 31, 2024 , as compared to the significant accounting policies disclosed in Note 1, "Summary of Significant Accounting Policies" in the Company's Annual Report.

There have been no changes in the Company’s significant accounting policies as of June 30, 2024 , as compared to the significant accounting policies disclosed in Note 1, "Summary of Significant Accounting Policies" in the Company's Annual Report.

Equity Method Investments

2 unchanged sentences

The Company reflects its share of gains and losses from the investment in equity in net loss of affiliate in the unaudited condensed consolidated statements of operations using the most recently available earnings data at the end of the period.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

In connection with the sale of GMI to GMDC on March 17, 2023 ( the "Sale Date"), the Company received common stock in GMDC representing approximately 24.9 % of the equity of GMDC.

2 unchanged sentences

On August 9, 2023, the Company sold its remaining equity interest in GMDC in exchange for $ 400,000 in cash and recognized a gain on sale of $ 64,525 .

As of March 31, 2024 the Company has no equity investment in GMDC nor any other equity exposure to the GMI business.

WaveDancer, Inc.

Form 10 -Q March 31, 2024

Since August 9, 2023, the Company has no equity investment in GMDC nor any other equity exposure to the GMI business.

Use of Estimates

7 unchanged sentences

Concentration of Credit Risk

During the three months ended March 31, 2024 , the Company’s prime contracts with U.S.

During the three months ended June 30, 2024 , the Company’s prime contracts with U.S.

government agencies represented 7.1 %of revenue and subcontracts under federal procurements represented 92.9 % of revenue.

2 unchanged sentences

Revenue from one prime contractor under which the Company has multiple subcontracts represented 61.2 % of the Company’s revenue in aggregate.

During the three months ended March 31, 2023 , the Company’s prime contracts with U.S.

During the three months ended June 30, 2023 , the Company’s prime contracts with U.S.

government agencies represented 10.2 % of revenue and subcontracts under federal procurements represented 89.7 % of revenue, and 0.1 % of revenue came from commercial contracts.

2 unchanged sentences

Revenue from one prime contractor under which the Company has multiple subcontracts represented 55.1 % of the Company’s revenue in aggregate.

As of March 31, 2024 , the Company’s accounts receivable included receivables from three subcontracts under federal procurements that represented 24.0 %, 20.7 %, and 14.0 % of the Company’s outstanding accounts receivable, respectively.

During the six months ended June 30, 2024 , the Company’s prime contracts with U.S.

government agencies represented 8.0 % of revenue and subcontracts under federal procurements represented 92.0 % of revenue.

The terms of these contracts and subcontracts vary from single transactions to five years.

Three subcontracts under federal procurements represented 29.5 %, 23.3 %, and 17.2 % of revenue, respectively.

Revenue from one prime contractor under which the Company has multiple subcontracts represented 60.0 % of the Company’s revenue in aggregate.

During the six months ended June 30, 2023 , the Company’s prime contracts with U.S.

government agencies represented 9.1 % of revenue and subcontracts under federal procurements represented 89.3 % of revenue, and 1.6 % of revenue came from commercial contracts.

The terms of these contracts and subcontracts vary from single transactions to five years.

Three subcontracts under federal procurements represented 30.3 %, 21.1 %, and 16.6 % of revenue, respectively.

Revenue from one prime contractor under which the Company has multiple subcontracts represented 54.5 % of the Company’s revenue in aggregate.

As of June 30, 2024 , the Company’s accounts receivable included receivables from three subcontracts under federal procurements that represented 22.5 %, 24.8 %, and 14.9 % of the Company’s outstanding accounts receivable, respectively.

Receivables from one prime contractor under which the Company has multiple subcontracts represented 52.9 % of the Company’s outstanding accounts receivable in aggregate.

As of March 31, 2023 , the Company’s accounts receivable included receivables from three subcontracts under federal procurements that represented 41.0 %, 12.0 %, and 12.5 % of the Company’s outstanding accounts receivable, respectively.

As of December 31, 2023 , the Company’s accounts receivable included receivables from two subcontracts under federal procurements that represented 30.2 % and 29.3 % of the Company’s outstanding accounts receivable, respectively.

Receivables from one prime contractor under which the Company has multiple subcontracts represented 70.1 % of the Company’s outstanding accounts receivable in aggregate.

7 unchanged sentences

The value of these services were $ 65,000 which was paid by GMDC at closing and was not subject to adjustment.

WaveDancer, Inc.

Form 10 -Q March 31, 2024

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

The $ 65,000 prepayment was included in other accrued liabilities on the unaudited condensed consolidated balance sheet as of March 31, 2023, and was amortized as a reduction to selling, general and administrative expenses ratably over the three -month period ending June 30, 2023 after which time no further transition services were provided.

22 unchanged sentences

The contingent consideration receivable of $ 682,000 was settled in cash for $ 1,000,000 and a gain of $ 318,000 was recognized (see Note 5 ).

The following table sets forth details of net earnings from discontinued operations for the three months ended March 31, 2024 and 2023 , which reflects the results of the Blockchain SCM operating segment through the date our controlling financial interest in it was sold – March 17, 2023 ( See Note 1 ).

Three Months Ended March 31,

The following table sets forth details of net earnings from discontinued operations for the six months ended June 30, 2024 and 2023 , which reflects the results of the Blockchain SCM operating segment through the date our controlling financial interest in it was sold – March 17, 2023 ( See Note 1 ).

Six Months Ended June 30,

Cost of revenue

14 unchanged sentences

$ - $ ( 335,993 )

WaveDancer, Inc.

Form 10 -Q March 31, 2024

During the three months ended March 31, 2023 , there was a total of 715,000 unvested stock options forfeited by GMI employees, including 527,500 forfeited by employees who resigned from WaveDancer, on the Sale Date, and were offered employment by GMDC.

Stock-based compensation expense of $ 407,322 , previously recognized for these forfeited options, was taken back into income in March 2023.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

During the six months ended June 30, 2023 , there was a total of 715,000 unvested stock options forfeited by GMI employees, including 527,500 forfeited by employees who resigned from WaveDancer, on the Sale Date, and were offered employment by GMDC.

Stock-based compensation expense of $ 407,322 , previously recognized for these forfeited unvested options, was taken back into income in March 2023.

Revenue from Contracts with Customers

17 unchanged sentences

Because of the support performance obligations, and because the amount of support is not estimable, the Company recognizes revenue ratably over time as it makes itself available to provide the support.

WaveDancer, Inc.

Form 10 -Q March 31, 2024

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

Disaggregation of Revenue from Contracts with Customers

Three Months Ended March 31,

Three Months Ended June 30,

Contract Type

11 unchanged sentences

$ 1,903,602 100.0 % $ 2,024,622 100.0 %

Six Months Ended June 30,

Contract Type

Services time & materials

$ 3,344,653 87.6 % $ 3,600,335 86.0 %

Services fixed price over time

214,950 5.6 % 204,804 4.9 %

Services combination

63,840 1.7 % 66,180 1.6 %

Services fixed price per unit

136,523 3.6 % 200,096 4.8 %

Third-party software

59,009 1.5 % 113,330 2.7 %

Total revenue

$ 3,818,975 100.0 % $ 4,184,745 100.0 %

Contract Balances

4 unchanged sentences

Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.

There were no such allowances recognized as of March 31, 2024 and December 31, 2023 .

Accounts receivable as of March 31, 2024 and December 31, 2023 , consist of the following:

March 31, 2024

There were no such allowances recognized as of June 30, 2024 and December 31, 2023 .

Accounts receivable as of June 30, 2024 and December 31, 2023 , consist of the following:

June 30, 2024

December 31, 2023

6 unchanged sentences

Billed receivables from the federal government include amounts due from both prime contracts and subcontracts where the federal government is the end customer.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

Contract Liabilities

5 unchanged sentences

Balance at March 31, 2024

Contract liabilities added

Revenue recognized

Balance at June 30, 2024

Balance at December 31, 2022

1 unchanged sentence

Balance at March 31, 2023

Revenues recognized during the three months ended March 31, 2024 and 2023 , from the balances as of December 31, 2023 and 2022 , were $ 55,531 and $ 55,665 , respectively.

WaveDancer, Inc.

Form 10 -Q March 31, 2024

Revenue recognized

Balance at March 31, 2023

Revenues recognized during the three months ended June 30, 2024 and 2023 , from the balances as of December 31, 2023 and 2022 , were $ 31,237 and $ 55,665 , respectively.

Revenues recognized during the six months ended June 30, 2024 and 2023 , from the balances as of December 31, 2023 and 2022 , were $ 85,035 and $ 110,753 , respectively.

Deferred Costs of Revenue

2 unchanged sentences

The Company recognizes these direct costs ratably over time as it makes itself available to provide its performance obligation for software support, commensurate with its recognition of revenue.

As of December 31, 2022 and March 31, 2023 the Company had no deferred costs of revenue.

Changes in deferred costs of revenue balances for the three months ended March 31, 2024 are as follows:

Changes in deferred costs of revenue balances for the three and six months ended June 30, 2024 are as follows:

Balance at December 31, 2023

1 unchanged sentence

Balance at March 31, 2024

Deferred costs expensed

Balance at June 30, 2024

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

The Company has two significant operating leases, one for its headquarters offices in Fairfax, Virginia (the "Fairfax Lease") and one for additional office space in Annapolis, Maryland.

3 unchanged sentences

Under lease modification standards, the Company reassessed the Fairfax Lease, resulting in the derecognition of the related lease asset of $ 165,721 and lease liabilities of $ 172,140 on the Company's condensed consolidated balance sheets and a gain on lease termination of $ 6,419 as presented on the Company's condensed consolidated statements of operations.

As of March 31, 2024 and December 31, 2023 , the Company does not have any sales-type or direct financing leases.

As of June 30, 2024 and December 31, 2023 , the Company does not have any sales-type or direct financing leases.

Each of the Company’s operating lease assets represent its right to use an underlying asset for the lease term and the related lease liability represents its obligation to make lease payments arising from the lease.

8 unchanged sentences

The Company does not sublease any real estate to third parties.

As of March 31, 2024 , our remaining operating lease had a weighted average remaining lease term of 7 months and a weighted average discount rate of 4.5 %.

Future lease payments under operating leases as of March 31, 2024 , were as follows:

As of June 30, 2024 , our remaining operating lease had a weighted average remaining lease term of 4 months and a weighted average discount rate of 4.5 %.

Future lease payments under operating leases as of June 30, 2024 , were as follows:

Remainder of 2024

1 unchanged sentence

Present value of lease liabilities

The total expense incurred related to its operating leases was $ 38,719 and $ 38,053 for the three months ended March 31, 2024 and 2023 , respectively, and is included in selling, general and administrative expenses on the condensed consolidated statements of operations.

WaveDancer, Inc.

Form 10 -Q March 31, 2024

The total expense incurred related to its operating leases was $ 37,106 and $ 38,053 for the three months ended June 30, 2024 and 2023 , respectively, and $ 75,825 and $ 76,106 for the six months ended June 30, 2024 and 2023 and is included in selling, general and administrative expenses on the condensed consolidated statements of operations.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

Fair Value Measurements

5 unchanged sentences

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents the fair value hierarchy for the Company’s financial instruments measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 :

March 31, 2024

The following table presents the fair value hierarchy for the Company’s financial instruments measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 :

June 30, 2024

Cash equivalents:

12 unchanged sentences

On August 9, 2023, the Company and GMDC agreed to terminate all rights and obligations with respect to the calculation and payment of future contingent payments from GMDC to the Company in exchange for the payment of $ 1,000,000 cash by GMDC to the Company, resulting in a gain of $ 318,000 .

There were no assets requiring Level 3 fair value measurements as of March 31, 2024 and December 31, 2023 .

There were no unrealized gains or losses recognized in income for the three -month periods ended March 31, 2024 and 2023 .

WaveDancer, Inc.

Form 10 -Q March 31, 2024

There were no assets requiring Level 3 fair value measurements as of June 30, 2024 and December 31, 2023 .

There were no unrealized gains or losses recognized in income for the three - or six -month periods ended June 30, 2024 and 2023 .

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

Intangible Assets

2 unchanged sentences

Balance December 31, 2023

Balance March 31, 2024

Intangible assets with estimated useful lives

Customer relationships

Non-compete agreements

Accumulated amortization

Intangible assets with indefinite lives

Net identifiable intangible assets

Weighted Average Useful Life (Years)

Balance December 31, 2022

Balance March 31, 2023

Balance June 30, 2024

Intangible assets with estimated useful lives

Customer relationships

8.0 $ 1,090,000 $ - $ 1,090,000

Non-compete agreements

3.0 120,000 - 120,000

Accumulated amortization

( 484,461 ) ( 78,183 ) ( 562,644 )

725,539 ( 78,183 ) 647,356

Intangible assets with indefinite lives

280,000 - 280,000

Net identifiable intangible assets

As of March 31, 2024 , expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter is as follows:

$ 1,005,539 $ ( 78,183 ) $ 927,356

June 30, 2024 , expected amortization expense relating to purchased intangible assets for each of the next

five years and thereafter is as follows:

Remainder of 2024

WaveDancer, Inc.

Form 10 -Q March 31, 2024

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

Stock-Based Compensation

4 unchanged sentences

The Company recognizes compensation costs on a straight-line basis over the service period of the awards.

There were no option awards granted in the three months ended March 31, 2024 and 2023 .

There were zero and 2,000 options exercised during the three months ended March 31, 2024 and 2023 , respectively.

As of March 31, 2024 , there was $ 222,359 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the stock incentive plans;

There were no option awards granted in the six months ended June 30, 2024 and 2023 .

There were no options exercised during the three months ended June 30, 2024 and 2023 , respectively, and zero and 667 options exercised during the six months ended June 30, 2024 and 2023 .

As of June 30, 2024 , there was $ 162,308 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the stock incentive plans;

that cost is expected to be recognized over a weighted-average period of 11 months.

Total compensation expense related to these plans was $ 113,780 and $ 288,172 for the three months ended March 31, 2024 and 2023 , respectively, and is included in selling, general and administrative expenses on the condensed consolidated statements of operations.

Total compensation expense related to these plans was $ 60,216 and $ 88,159 for the three months ended June 30, 2024 and 2023 , respectively, and $ 173,996 and $ 376,331 for the six months ended June 30, 2024 and 2023 , respectively, and is included in selling, general and administrative expenses on the condensed consolidated statements of operations.

Revolving Line of Credit

On September 30, 2022, the Company entered a revolving line of credit with Summit Community Bank (“Summit”) that provided for on-demand or short-term borrowings of up to $ 1,000,000 at a variable interest rate equal to the prime rate as published in The Wall Street Journal , with a minimum rate of 3.99 % and a maximum rate of 20.00 %, and subject to a borrowing base calculated using outstanding accounts receivable.

On September 30, 2022, the Company entered a revolving line of credit with Summit Community Bank that provided for on-demand or short-term borrowings of up to $ 1,000,000 at a variable interest rate equal to the prime rate as published in The Wall Street Journal , with a minimum rate of 3.99 % and a maximum rate of 20.00 %, and subject to a borrowing base calculated using outstanding accounts receivable.

Borrowings under the line of credit are secured by the assets of the Company.

There were no borrowings and no repayments during the three months ended March 31, 2024 , and there was $ 575,000 of borrowings and no repayments during the three months ended March 31, 2023 .

This line of credit expired on August 16, 2023.

On September 11, 2023, the Company and Summit entered a new line of credit agreement with the same terms as the preceding agreement, except that the maximum availability under the new line was reduced from $ 1,000,000 to $ 500,000 .

As of March 31, 2024 , there was $ 500,000 outstanding and no borrowing availability under this line of credit.

The line of credit expires on May 16, 2024.

The Company is seeking a short-term extension from the lender to allow for additional time to close the Merger transaction, upon which the lender will be repaid in full.

As of March 31, 2024, the fair value of debt outstanding on our revolving line of credit approximates its carrying value due to the short term nature of the facility.

WaveDancer, Inc.

Form 10 -Q March 31, 2024

On September 11, 2023, the Company and SCB entered a new line of credit agreement with the same terms as the preceding agreement, except that the maximum availability under the new line was reduced from $ 1,000,000 to $ 500,000 .

There were no borrowings and $ 200,000 of repayments during the six months ended June 30, 2024 .

As of June 30, 2024 , there was $ 300,000 outstanding and no borrowing availability under this line of credit.

The line of credit expired on July 16, 2024.

On August 12, 2024, upon the close of the Merger, the lender was repaid in full.

As of June 30, 2024, the fair value of debt outstanding on our revolving line of credit approximates its carrying value due to the short term nature of the facility.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.) Form 10 -Q June 30, 2024

Sales of Shares Under Common Stock Purchase Agreement

10 unchanged sentences

Use of the ELOC is subject to restrictions based on the price and trading volume of our stock, which limits its availability to the Company as a significant source of capital.

During the three months ended March 31, 2024 , the Company had no sales of shares of common stock.

During the three months ended March 31, 2023 , the Company sold 7,429 shares of common stock under the ELOC at an average price of $ 7.20 per share, net of fees of approximately $ 0.40 per share.

During the three and six months ended June 30, 2024 , the Company had no sales of shares of common stock.

During the three months ended June 30, 2023 , the Company had no sales of shares of common stock, and during the six months ended June 30, 2023 , the Company sold 2,479 shares of common stock under the ELOC at an average price of $ 21.56 per share, net of fees of approximately $ 1.20 per share.

The net proceeds from this sale were $ 53,453 .

For the three months ended March 31, 2024 and 2023 , the Company’s effective tax rate was 0 %.

The difference between the statutory tax rate and the effective tax rate for the three months ended March 31, 2024 is primarily driven by the presence of a full valuation allowance against all deferred tax assets.

For the three and six months ended June 30, 2024 , the Company’s effective tax rate was 0 %.

The difference between the statutory tax rate and the effective tax rate for the three and six months ended June 30, 2024 , is primarily driven by the presence of a full valuation allowance against all deferred tax assets.

Loss Per Share

1 unchanged sentence

Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, except for periods when the Company reports a net loss because the inclusion of such items would be antidilutive.

The antidilutive effects of 3,929 shares from stock options and zero shares from warrants, and 34,599 shares from stock options and zero shares from warrants, were excluded from diluted shares for the three months ended March 31, 2024 and 2023 , respectively.

WaveDancer, Inc.

Form 10-Q March 31, 2024

The antidilutive effects of 913 shares from stock options and zero shares from warrants were excluded from diluted shares for the three months ended June 30, 2024 , respectively.

The antidilutive effects of 1,309 shares from stock options and zero shares from warrants, and 6,504 shares from stock options and zero shares from warrants, were excluded from diluted shares for the six months ended June 30, 2024 and 2023 , respectively.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.)

Form 10-Q June 30, 2024

Subsequent Events

Reverse Merger with Firefly

On August 12, the Company consummated its previously announced Merger with Firefly 2023, pursuant to which each holder of outstanding shares of Firefly 2023 Common Stock received the number of shares of New Firefly Common Stock equal to the number of shares of Firefly 2023 Common Stock such stockholders held multiplied by the exchange ratio, or an aggregate of 7,870,251 shares of Firefly common stock at Closing using the Exchange Ratio.

Additionally, upon at the effective time of the Merger:

and (ii) Firefly effected a reverse stock split of all of the then issued and outstanding shares of Firefly Common Stock at a ratio of 1 -for- 3 .

Private Placement

As previously reported, on July 26, 2024, Firefly 2023 entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors, pursuant to which Firefly 2023 agreed to issue and sell (i) shares of Firefly 2023 Common Stock (the "PIPE Shares") or, to the extent that such purchase of PIPE Shares would result in the investors, together with their affiliates and certain related parties, beneficially owning more than 4.99 % of the outstanding shares of the Company immediately following the consummation of the Merger, pre-funded warrants (the “Pre-Funded Warrants”) to purchase such PIPE Shares in excess of 4.99 % of the outstanding shares of the Company’s common stock, and (ii) warrants (the “Warrants”) to purchase shares of Firefly 2023 Common Stock in a private placement (the “Private Placement”) for aggregate gross proceeds of approximately $ 3.5 million, before deducting estimated offering expenses payable by Firefly 2023.

The purchase price of each PIPE Share and accompanying Warrant was $ 1.326 and the purchase price of each Pre-Funded Warrant and accompanying Warrant was $ 1.3257 .

The Private Placement closed on August 12, 2024, substantially contemporaneous with the consummation of the Merger.

None of the issuances of the PIPE Shares, the Pre-Funded Warrants, the Warrants, or the shares of the Company’s common stock issuable upon exercise of the Pre-Funded Warrants and the Warrants (collectively, the “Warrant Shares”) were registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws.

The PIPE Shares, the Pre-Funded Warrants, the Warrants and the Warrant Shares have been and will be, as applicable, issued in reliance on the exemptions from registration provided by Section 4 (a)( 2 ) under the Securities Act and/or Regulation D promulgated thereunder.

The investors that entered into to a Purchase Agreement represented that they accredited investors, as defined in Rule 501 of Regulation D promulgated under the Securities Act.

Tellenger Sale

In connection with and prior to the consummation of the Merger, pursuant to the previously announced Stock Purchase Agreement, dated as of November 15, 2023, by and among the Company, Wavetop and Tellenger, Wavetop purchased from the Company all of the issued and outstanding shares of common stock, par value $ 1.00 per share, of Tellenger prior to the merger, for an aggregate purchase price of $ 1.5 million, plus the assumption of the employment agreements that WaveDancer was obligated under with G.

James Benoit, Jr., Gwen Pal and Stan Reese, which included provisions to pay severance under certain circumstances.

The purchase price was paid in full in cash less the outstanding balance of $ 300,000 under WaveDancer’s $ 500,000 credit facility with Summit Commercial Bank, N.A..

The balance of the credit facility at SCB was paid in full concurrent with the close of the Merger.

Following the sale of Tellenger and the consummation of the Merger, the business of Firefly 2023 became the business of the Company.

Working Capital Letter Agreement

On July 23, 2024, Firefly 2023 advanced $ 75,000 cash in working capital to WaveDancer under a letter agreement.

The letter agreement established that the advance would be repaid upon the close of the Merger.

WaveDancer had sufficient funds after paying all of its other specific liabilities.

The advance was not repaid, but was considered in the calculation of the Exchange Ratio.

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.)

Form 10-Q June 30, 2024

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