What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-04-03 compared with 2024-03-20 · 220 added, 143 removed, 6 unchanged (98% of the section changed)

1 unchanged sentence

Market Information

Our common stock is listed on the NASDAQ Capital Market (“NASDAQ”) under the trading symbol “WAVD”.

As of December 31, 2023, we had 205 holders of record of our Common Stock.

We have never paid any cash dividends on our common stock and do not anticipate paying cash dividends within the foreseeable future.

Our management anticipates that all earnings, if any, will be reinvested in our business.

Any future dividends will be subject to the discretion of the board of directors and will depend on, among other things, future earnings, our operating and financial condition, our capital requirements, and general business conditions.

On August 12, 2024, the Merger closed, and on August 13, 2024, we began trading on Nasdaq under the ticker symbol “AIFF.” Prior to the listing, there was no public market for our Common Stock.

Number of Holders of Our Common Stock

As of March 25, 2025, there were approximately 380 holders of record of our Common Stock, which does not include holders whose shares are held in nominee or “street name” accounts through banks, brokers or other financial institutions.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by this Item regarding equity compensation plans is incorporated by reference to the information set forth in Part III.

“ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Securities Authorized for Issuance Under Equity Compensation Plans ”.

Dividend Policy

We have never declared or paid cash dividends on our Common Stock.

We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our Common Stock in the near future.

We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our Common Stock.

Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant.

See also Part II.

“ Risk Factors – We do not anticipate that we will pay any cash dividends in the foreseeable future .”

Recent Sales of Unregistered Securities

There were no unregistered sales of equity securities during the year ended December 31, 2023 that were not disclosed by the Company on a Current Report on Form 8-K.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During 2024, we did not sell any equity securities that were not subsequently registered under the Securities Act and that were not previously disclosed in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

Purchases of Equity Securities

No repurchases of our Common Stock were made during the 2024 fiscal year.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this Annual Report.

This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those discussed below.

Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in Part I, Item 1A, “ Risk Factors.

Beginning in August 2021, we embarked on a transformative strategy to reposition the Company as a leader in the Zero-Trust, blockchain and secure supply chain marketplace.

In December 2021, we acquired Gray Matters, Inc.

(“GMI” or "Gray Matters") whose blockchain and encryption algorithm technology was built to solve real-world problems through purpose-built innovation in secure Supply Chain Management (SCM) in United States government organizations.

After closing on the GMI acquisition, we focused on the second of our two intended foundational acquisitions, Knowmadics, Inc.

(“KMI”), a leading Internet of Things (IoT) remote device management and monitoring platform company.

After signing a definitive agreement in March of 2022, we terminated the agreement with KMI on June 6, 2022 due to our inability to raise the funds required to complete the deal under its original terms.

After our GMI acquisition, we experienced ongoing delays in generating revenue from the Blockchain SCM business and sustained steady operating cash losses.

In the fourth quarter of 2022, the Company concluded that its likely best course of action was to divest of the Blockchain SCM business and on March 17, 2023, the Company sold approximately 75.1% of the equity of its GMI subsidiary to Gray Matters Data Corporation (“GMDC”) for cash of $0.9 million, approximately 24.9% of the voting securities of GMDC, and future cash payments contingent upon future GMI revenues.

On August 9, 2023, the Company sold its remaining equity interest in GMDC in exchange for $400,000 in cash, and settled the contingent consideration receivable, which was valued at $682,000 for financial reporting purposes, for a one-time cash payment of $1,000,000.

See Note 2 to the consolidated financial statements for further information about the sale of GMI.

As a result of the sale of GMI, the Company’s business reverted solely to its longstanding and legacy government services business through which the Company provides professional services for the benefit of government agencies.

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 is contingent upon the approval of WaveDancer and Firefly shareholders as well as satisfaction of other closing conditions including, among other things, approval of the shareholders of both WaveDancer and Firefly, the Company having sufficient cash to satisfy all its outstanding liabilities as of the closing date, and approval by Nasdaq Capital Markets LLC ("Nasdaq") of Firefly's initial listing application.

In connection with and nearly simultaneous with the closing of the Merger, WaveDancer will sell its Tellenger subsidiary, the company through which WaveDancer operates its day-to-day business, to WaveTop Solutions, Inc., a company owned and controlled by WaveDancer's chairman and chief executive officer, for $1.5 million of cash.

Upon closing, 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 (“FDA”).

Since late last year, we have been devoting our efforts to closing the Merger with Firefly.

If the Merger does not close, we will need to make fundamental decisions as to how to proceed with our business.

We anticipate that we will confront delisting from the Nasdaq Stock Market.

The standalone business of our operating subsidiary, Tellenger, is profitable but cannot support the administrative expenses of being a public reporting company.

In addition, we will lack the required capital to satisfy our liabilities and we may need to consider a sale of Tellenger to acquire the capital necessary to satisfy these liabilities or attempt to achieve work-out arrangements with our creditors.

Key Factors Affecting Our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us, as discussed in Part I, Item 1, “Business,” but also pose risks and challenges, as discussed in Part I, Item 1A, “Risk Factors.”

Results of Operations

The following table sets forth, for the periods indicated, selected information from our Consolidated Statements of Operations and the notes to the consolidated financial statements, expressed as a percentage of revenue:

Year Ended December 31,

Professional fees

Software sales

Total revenues

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 sale of equity investment and settlement of contingent consideration receivable

Other income, net

Interest expense

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

Income tax (benefit) expense

Net loss from continuing operations before equity in net loss of affiliate

Equity in net loss of affiliate

Net loss from continuing operations

Loss from discontinued operations

Revenue decreased by 27.6%, or $3.0 million, from $11.0 million in 2022 to $8.0 million in 2023.

This net decrease includes a decrease in professional services revenue of 6.6%, or $0.6 million and a decrease in revenue from sales of third-party software, primarily Adobe products, of 92.9% or $2.5 million.

During 2023, we continued to de-emphasize sales of third-party software products because they have generated very low gross profits of 0.9% and 6.2% in 2023 and 2022, respectively, and also require relatively significant administrative effort.

Gross profit decreased by $0.3 million, or 8.7%, from $2.9 million in 2022 to $2.6 million in 2023, with gross profit percentage increasing from 26.0% to 32.8%.

This net decrease in gross profit is primarily attributable to $0.2 million of lower gross profit from third party product sales.

This decline in gross profit is fully offset by decreases in commissions and other expenses directly related to the sale of third party software.

Selling, General and Administrative Expenses ( “ SG&A")

SG&A expenses decreased from $8.2 million in 2022 to $5.8 million, a decrease of 29.1%, in 2023 as follows:

Increase/ (Decrease)

This summary highlights selected information from this filing and may not contain all of the information that is important to you in making an investment decision.

Before investing in our securities, you should carefully read this entire filing, including our financial statements and the related notes included in this filing and the information set forth under the headings “ Risk Factors ” and “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

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

Our FDA-510(k) cleared Brain Network Analytics software platform (the “BNA Platform”) 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.

We have invested a substantial amount of time and resources to develop the software, compile the requisite database of brain wave tests, gain patent protection, and receive Federal Drug Administration (“FDA”) clearance to market and sell the BNA Platform.

The BNA Platform is a software as a medical solution that was developed using AI through unsupervised machine learning (via clustering analysis) on our extensive proprietary database of standardized, high-definition longitudinal electroencephalograms (“EEG”) of over 18,000 patients representing twelve disorders, as well as clinically normal patients.

The BNA Platform, in conjunction with an FDA-cleared EEG system, may provide clinicians with comprehensive insights into brain function (cognition).

These insights could enhance a clinician’s ability to accurately diagnose mental illnesses and cognitive disorders and assist in evaluating what therapy or drug is best suited to optimize a patient’s outcome.

As of the date of this filing, the BNA Platform has been developed and is in the pre-commercial stages, but has not yet been launched widely.

However, we are currently planning to undertake a commercial launch of the BNA Platform in 2025.

We do not expect that additional development costs to achieve this commercial launch will be material.

We believe there is potential for such commercialization, both with respect to pharmaceutical companies in their drug research and clinical trial activities, as well as medical practitioners in their clinics.

In concert with the commercialization of BNA Platform, we are collaborating with neuroscience drug development companies to support their clinical strategies.

We plan to generate revenue through two segments:

through the use of BNA Platform by United States neurologists and through collaborations with pharmaceutical companies in support of neuroscience drug development.

The proposed business model for neurological clinics consists of a base service fee for licensing the product and a per use fee based on volume.

The proposed business model for pharmaceutical companies will be tailored to each customer based on the volume and costs associated to provide such services.

In order to commercially launch to the medical community, the company has hired sales staff, conducted soft launches into a number of strategic accounts and plans to continue marketing efforts to secure new accounts.

In 2025, the company will focus on targeted outreach and client engagement to commercialize the BNA Platform in the clinics segment.

Using its database of potential customers, the company will identify key targets in select markets and connect with them through personalized emails and calls to schedule meetings with decision-makers.

The sales team, equipped with marketing materials, case studies, peer-reviewed publications, and knowledge gained from our current research partners, are focused on presenting the platform’s benefits and practical applications during these meetings.

Follow-up efforts, including addressing questions and offering support by our Neurological Team, will aim to build strong client relationships and drive adoption of the platform.

The clinical utility of EEG technology to support better outcomes for patients with mental illnesses and cognitive disorders has been well documented.

Historically, clinical adoption of EEG by medical professionals, including psychiatrists, neurologists, nurse practitioners and general practitioners, has been limited due to the complexity of interpreting EEG recordings and the inability to practically compare a patient’s brain function to that of a clinically normal age-matched patient.

Firefly believes that without defining a standard deviation to the norm, it is not possible to objectively assess brain function.

By establishing an objective baseline measurement of brain function, the BNA Platform enables clinicians to optimize patient care, leading to improved outcomes for people suffering from mental illnesses and cognitive disorders.

Our value proposition is supported by real-world use of the BNA Platform.

Incorporating the BNA Platform as part of a patient management protocol demonstrated improved response rates, enhanced therapy compliance, reduced non-responder rates and a reduction in need for medication switching among patients.

Further, we believe that our extensive clinical database, when combined with advanced AI, provides the opportunity to identify clinically relevant biomarkers that will support better patient outcomes through precision medicine and companion diagnostics.

We expect to gather additional data through the clinical deployments and clinical studies conducted by drug companies.

This additional data may allow us to discover new biomarkers and objectively measure the impact of therapeutic interventions on patients of different types, further enhancing our platform’s effectiveness.

We believe that we will be able to enhance accurate diagnosis and predict what therapy or drug, or a combination thereof, may be best suited to optimize patient outcomes.

This represents a paradigm shift in how clinicians manage patients with mental illnesses and cognitive disorders holding the potential to transform brain health.

Recent Developments

Reverse Merger with WaveDancer

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, prior to the consummation of the Merger, WaveDancer effectuated a 1-for-3 reverse stock split of its common stock (the “Reverse Stock Split”).

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.”

Private Placement

On July 26, 2024, prior to the consummation of the Merger, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we agreed to issue and sell an aggregate of (i) 319,207 PIPE Shares, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 504,324 shares of our Common Stock, and (iii) warrants (the “Warrants”) to purchase up to 823,529 shares of Common Stock in the Private Placement.

The purchase price of each PIPE Share and accompanying Warrant was $4.25 and the purchase price of each Pre-Funded Warrant and accompanying Warrant was $4.249.

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

The aggregate gross proceeds from the transaction were approximately $3.5 million, before deducting estimated offering expenses payable by us.

Series C Financing

Between August 29, 2023 and December 31, 2024, we raised an aggregate of $3,039,000 from a private placement of 246,919 Series C units, which such Series C Units were comprised of shares of Series C Preferred Stock and warrants to purchase up to 246,786 shares of common stock, which were sold at a combined purchase price of $12.31 per Series C Unit.

Each warrant has an exercise price of $24.62 per share (subject to adjustment from time to time in accordance with the terms thereof), is exercisable immediately upon issuance and expires at 4:30 p.m.

(New York time) three years following the initial date of issuance.

The Convertible Promissory Note and Warrant Offering

On December 20, 2024, the Company entered into the December 2024 Purchase Agreement with Helena, pursuant to which Helena and the Company agreed to execute and deliver to Helena a convertible promissory note (the “December 2024 Note”) in the principal amount of $2,400,000 and a purchase price of $2,040,000, and common stock purchase warrant (the “December 2024 Warrant”) to initially purchase an aggregate of 800,000 shares of Common Stock.

Pursuant to the December 2024 Purchase Agreement, the Company and Helena also entered into the December 2024 Registration Rights Agreement.

On the same date, the closing under the December 2024 Purchase Agreement occurred, and the Company issued the December 2024 Note and the December 2024 Warrant to Helena.

On February 14, 2025, the December 2024 Note was converted to 800,000 shares of Common Stock.

On February 19, 2025, the December 2024 Warrant were exercised, and 800,000 shares of Common Stock were issued to Helena.

The ELOC Purchase Agreement

On December 20, 2024, we entered into the ELOC Purchase Agreement with Arena.

Pursuant to the ELOC Purchase Agreement, we have the right to sell to Arena up to $10,000,000 of our Common Stock, subject to certain limitations and conditions set forth in the ELOC Purchase Agreement, from time to time during the term of the ELOC Purchase Agreement.

Sales of our Common Stock pursuant to the ELOC Purchase Agreement, and the timing of any sales, are solely and exclusively at our option, and we are under no obligation to sell any securities to Arena under the ELOC Purchase Agreement.

In accordance with the ELOC Purchase Agreement, we have filed the registration statement with the SEC to register under the Securities Act the resale by Arena of up to 2,934,666 shares of Common Stock that we may elect, in our sole discretion, to issue and sell to Arena, from time to time from and after the Commencement Date (defined below) under the ELOC Purchase Agreement.

The net proceeds to us from sales that we elect to make to Arena under the ELOC Purchase Agreement, if any, will depend on the frequency and prices at which we sell our Common Stock to Arena.

We expect that any proceeds received by us from such sales to Arena will be used for working capital and general corporate purposes.

The ELOC Purchase Agreement will automatically terminate on the earliest to occur of (i) the first day of the month following the 36-month anniversary of the Commencement Date, and (ii) the date on which Arena shall have purchased from us under the ELOC Purchase Agreement our Common Stock for an aggregate gross purchase price of $10,000,000, subject to the Exchange Cap.

We may terminate the ELOC Purchase Agreement effective upon five trading days’ prior written notice to Arena;

provided that (i) there are no outstanding Advance Notices, and the Common Stock under which have yet to be issued, and (ii) we have paid all amounts owed to Arena pursuant to the ELOC Purchase Agreement.

The ELOC Purchase Agreement may be terminated at any time by the mutual written consent of the parties.

Units Offering

On March 28, 2025, we entered into a private placement subscription agreement (the “Subscription Agreement”) with certain accredited investors (the “Subscribers”), pursuant to which we agreed to issue and sell $547,737 of units (each a “Unit” and, collectively the “Units”), at a purchase price of $3.00 per Unit (the “Units Offering”).

Each Unit consists of (i) either (A) one share of Common Stock or (B) a prefunded warrant to purchase Common Stock to the extent that acquiring the shares of Common Stock instead of such prefunded warrants would have caused the Subscriber to own in excess of 4.99% of the shares of outstanding Common Stock on a post-issuance basis and (ii) one common stock purchase warrant to purchase Common Stock over thirty-six (36) months at an exercise price of $4.00 per share.

On the same date, the closing under the Subscription Agreement occurred, and we issued the Units to the Subscribers.

The prefunded warrants have a nominal exercise price of $0.0001 (subject to standard adjustments for stock splits, stock dividends, recapitalizations, mergers and similar transactions) and may be exercised on a cashless basis.

The prefunded warrants also contain a beneficial ownership limitation which provides that the Company shall not effect any exercise, and a holder shall not have the right to exercise, any portion of a prefunded to the extent that, after giving effect to the exercise, such holder (together with such holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the exercise.

This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.

In connection with the Units Offering, we entered into a finder fee agreement with Canaccord Genuity Corp.

(“Canaccord”), pursuant to which the Company will pay Canaccord at the closing of the Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the Units Offering from persons introduced to the Company by Canaccord, payable in cash;

and (ii) the issuance of share purchase warrants (the “Finder’s Warrant”) of the Company to Canaccord of up to 7.5% of the Units subscribed for by person introduced to the Company by Canaccord.

Each Finder’s Warrant will be exercisable to purchase one additional Common Stock at $4.00 per share for a period of 36 months from the closing of the Units Offering.

Financial Operations Overview

Revenue consists of BNA testing, equipment rental and the undertaking of projects and/or clinical studies.

In the future, we plan to generate revenue through two segments:

through the use of BNA Platform by neurologists in the United States and through collaborations with pharmaceutical companies in support of neuroscience drug development.

Operating Expense

Research and Development Expenses

Research and development expenses represent costs incurred to conduct research and development, such as the development of the BNA Platform.

We recognize all research and development costs as they are incurred.

Research and development expenses consist primarily of the following:

salaries and benefits;

Stock based compensation

Legal and professional fees

Depreciation & Amortization

Acquisition costs

Software, IT and office expenses

Governance and investor relations

Marketing and promotions

Gain on Litigation Settlement

In 2023, we had a gain of $1.4 million on the settlement of litigation.

As discussed in Note 9 to the consolidated financial statements, the Company and Jeffrey Gerald, the individual from whom the WaveDancer purchased all the outstanding shares of GMI, were engaged in litigation about Mr.

Gerald's termination as an employee of the Company as well as whether the Company should be required to pay the deferred consideration of $1.5 million that would have been payable on December 10, 2023.

The Company and Gerald settled the litigation, resolving all outstanding matters between them, including termination of the $1.5 million deferred consideration obligation under the terms of the GMI acquisition agreement.

For 2023 we had a net loss of $2.0 million versus $17.8 million in 2022.

The primary drivers of the $15.7 million reduction in net loss in 2023 include the inclusion in the 2022 net loss of impairment losses of $10.2 million in our GMI business which was sold in 2023, a reduction of other GMI losses of $1.0 million, reduced operating expenses in 2023 from continuing operations of $2.4 million, and the $1.4 million gain on litigation settlement in 2023.

Liquidity and Capital Resources

During the year ended December 31, 2023, the Company generated a net loss from continuing operations of $1.7 million.

As of December 31, 2023, the Company had a working capital deficit of less than $0.1 million, including cash and cash equivalents of $0.7 million.

As of December 31, 2023 the Company had $0.5 million outstanding under its bank line of credit and no borrowing availability.

In September, 2023, we sold 35,000 unregistered shares of our common stock in a private offering at a price of $5.00 per share from which we raised aggregate gross proceeds of $175,000.

The Company's current focus is on closing the Merger.

Under the terms of the Merger Agreement, we must have Parent Net Cash of no less than zero on the closing date.

Parent Net Cash means the amount of cash on hand, including the proceeds from the Tellenger Sale transaction of $1.5 million, less all of our liabilities - other than the operating liabilities associated with Tellenger - on the closing date, including transaction costs and severance obligations.

We estimate that the Company will need to raise between $0.8 million and $1.1 million of additional capital in order to reach the minimum required Parent Net Cash amount.

To raise this capital, we intend to conduct a private placement, the funding of which will be contingent on the Merger closing.

There can be no assurance that our efforts to undertake a private placement will be successful.

If the Company and Firefly are unable to raise the capital required to consummate the Merger, which for the Company is approximately $0.8 million to $1.0 million, and the Merger transaction does not close, we will likely be delisted from the Nasdaq as a result of not meeting the minimum stockholders’ equity requirement for continued listing, unless we are able to develop a plan for raising our stockholders’ equity that is acceptable to Nasdaq.

If the Merger does not close and we are delisted, we would implement an expense reduction program and may cease to be a reporting company, which would reduce our operating expenses significantly.

We would also likely need to raise additional capital to meet our liquidity commitments through the end of 2024 and beyond.

We may also need to pursue arrangements with our creditors to defer or curtail our obligations if we are unable to reduce our expenses quickly enough or raise additional capital.

The Company has no commitments for capital spending nor any plans for material capital expenditures.

consulting arrangements;

other expenses incurred to advance our research and development activities.

The largest component of our operating expenses has historically been the investment in research and development activities.

We expect research and development expenses will increase in the future as we further refine and optimize the BNA Platform and invest in its evolution.

It is likely that we will continue to evaluate opportunities and strategic partnerships to acquire or license other products and technologies, which may result in higher research and development expenses due to licensing fees and/or integrations.

Selling and Marketing Expenses

Selling and marketing expenses consist of employee-related expenses, including salaries, benefits, travel, clinical fees and other marketing functions, as well as fees paid for consulting services.

General and Administrative Expenses

General and administrative expenses consist of employee-related expenses, including salaries, benefits, travel and noncash stock-based compensation, and other administrative functions, as well as fees paid for legal, and accounting services, consulting fees and facilities costs not otherwise included in research and development expense.

Legal costs include general corporate legal fees and patent costs.

We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, additional insurance, investor relations and other administrative expenses and professional services.

Other (Income) Expense

Other (income) expense consists primarily of interest bank fees and loan fees, foreign exchange gain or loss, changes in derivative fair value and penalties.

Critical Accounting Estimates

Our significant accounting policies are described in Note 1 to our accompanying consolidated financial statements.

We prepare our financial statements in conformity with accounting principles generally accepted in the United States.

As such, we are required to make certain estimates and assumptions that we believe are reasonable based upon the information available.

These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented.

The actual results could be different from these estimates.

Our critical accounting estimates are those where we have made particularly difficult, subjective or complex judgments.

Changes in the assumptions and conditions included in these critical accounting estimates can materially impact our future financial results.

Revenue Recognition

We account for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers.” The unit of account in ASC 606 is a performance obligation, which is a promise in a contract with a customer to transfer a good or service to the customer.

ASC 606 prescribes a five-step model for recognizing revenue that includes identifying the contract with the customer, determining the performance obligation(s), determining the transaction price, allocating the transaction price to the performance obligation(s), and recognizing revenue as the performance obligations are satisfied.

The timing of the satisfaction of performance obligations varies based on whether we are selling a product or service and the contractual terms.

Significant judgment can be required in determining certain performance obligations, and these determinations could change the amount of revenue and profit recorded in a given period.

Our contracts may have a single performance obligation or multiple performance obligations.

When there are multiple performance obligations within a contract, we allocate the transaction price to each performance obligation based on our best estimate of standalone selling price.

The estimate of standalone selling price for each performance obligation constitutes a critical accounting estimate, since it is particularly complex and subjective and prone to change from period to period.

Stock-Based Compensation

The Company estimates the fair value of options granted using a Black-Scholes valuation model to establish the expense.

Determining the inputs for the valuation model requires significant judgment, particularly related to the estimation of stock price volatility.

Historically there has been a limited public market for the Company’s stock, and as a result the Company estimates its expected volatility by using the volatility of a pool of several public company issuers that operate within its market segment as a benchmark.

The Company adjusts the results of the benchmark analysis on the stock price volatility assumption to reflect differences in the size of the benchmark companies and their capital structures as compared to ours.

The selection of comparable companies and the amount of the size adjustment require significant judgment and changes in those assumptions could have a material impact on our reported results of operations.

The fair values of option awards granted in 2023 and 2022 were estimated using the Black-Sholes option pricing model under the following assumptions:

Risk-free interest rate

Dividend yield

Expected term (years)

Expected volatility

33.5% - 36.7%

45.8% - 48.1%

Goodwill, Intangible Assets and Other Long-lived Assets

Management evaluates the recoverability of the Company’s indefinite-lived intangible assets (tradenames) annually on October 31, or more often when events or circumstances indicate a potential impairment exists.

Management evaluates the recoverability of the Company’s finite-lived intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists.

In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets or asset groups that contain those assets.

If impairment is indicated based on a comparison of an asset group’s carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.

Goodwill is not amortized but instead tested for impairment (i) on at least an annual basis and (ii) when changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit may be below its carrying value.

These circumstances include, but are not limited to, significant changes in performance relative to expected operating results;

significant changes in the use of the assets;

significant negative industry or economic trends;

a significant decline in the Company’s stock price for a sustained period of time;

and changes in the Company’s planned revenue or earnings.

Management evaluates the recoverability of the Company’s goodwill annually on October 31 or more often as events or circumstances indicate the fair value of a reporting unit is below its carrying value, including goodwill.

If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the reporting unit carrying amount exceeds the estimated fair value of the reporting unit.

Government Regulation

We are bound by various rules and regulations promulgated by the federal government and agencies thereunder.

We have not experienced undue expense beyond those expenses normally incurred in our ordinary course of business in adhering to such rules and regulations.

Since historically most of our business is derived from contracts either directly with the U.S.

federal government or as a subcontractor on behalf of U.S.

federal government customers, most of our contracts are subject to termination at the election of the government.

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP.

The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and the disclosure of our contingent liabilities in our financial statements.

We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We evaluate our estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different assumptions or conditions.

See Note 3 to our financial statements elsewhere in this Annual Report for information about our significant accounting policies and how estimates are involved in the preparation of our financial statements.

We believe the following reflect the critical accounting estimates used in the preparation of our financial statements.

Results of Operations

The following table sets forth key components of our results of operations during the years ended December 31, 2024 and 2023.

$US, in thousands

OPERATING EXPENSES:

Research and development expenses

Selling and marketing expenses

General and administration expenses

Impairment of intangible assets

TOTAL OPERATING EXPENSES

OPERATING LOSS

OTHER (INCOME) EXPENSE

Interest and bank fees

Foreign exchange gain

Change in derivate fair value

Other (income) expenses

TOTAL OTHER EXPENSE

LOSS BEFORE INCOME TAX

Revenue for the year ended December 31, 2024, was $108,000, as compared to $498,000 in the year ended December 31, 2023, representing a decrease of $390,000 or 76%.

The decrease is primarily due to the recognition of deferred revenue relating to outstanding contracts when such contractual obligations were deemed fulfilled in 2023.

Operating Expenses

Research and Development Expenses

Research and development expenses for the year ended December 31, 2024, were $1,954,000, as compared to $741,000 for the year ended December 31, 2023, representing an increase of $1,213,000, or 164%.

The increase was primarily due to the vesting of outstanding management options in connection with the consummation of the Merger representing 47% of the increase and a further 26% due to additional internal resources being brought on in 2024.

Selling and Marketing Expenses

Selling and marketing expenses for the year ended December 31, 2024, were $1,201,000, as compared to $639,000 for the year ended December 31, 2023, representing an increase of $562,000, or 88%.

The increase was primarily due to three main drivers;

(i) the vesting of management options in connection with the consummation of the Merger representing 13% of the increase, (ii) additional internal resources in 2024 as compared to 2023 representing 7% of the increase, (iii) professional marketing services and related to brand image, brand awareness and the generation of marketing materials representing 59% of the increase.

General and Administration Expenses

General and administration expenses for the year ended December 31, 2024, were $6,133,000, as compared to $2,196,000 for the year ended December 31, 2023, representing an increase of $3,937,000, or 179%.

The primary increase was due to five main drivers being;

(i) the vesting of management options and other compensation in connection with the consummation of the Merger representing 25% of the increase, (ii) costs related to the vesting of certain warrants in connection with the consummation of the Merger representing 15% of the increase and as such, there is a one-time expense catch-up required, (iii) legal fees related to the consummation of the Merger representing 19% of the increase and as such a one-time expense, (iv) accounting and audit fees related to the reviewed and audited financial statements and notes thereto for the year ended December 31, 2024 and the years ended December 31, 2023 representing 11% of the increase and (v) other ongoing costs related to being a public company following the consummation of the Merger, including but not limited to the purchase of D&O insurance and the implementation of an investor relations program representing 11% of the increase.

Impairment of Intangible Assets

Impairment expenses for the year ended December 31, 2024, were $874,000, as compared to $nil for the year ended December 31, 2023 due to one of the capitalized upgrades no longer being expected to be utilized as a result in a change in management and subsequent direction.

Consequently, the upgrade was deemed fully impaired, resulting in the Company recording an impairment charge of $874,000.

Other (income) expense

Other (income) expense for the year months ended December 31, 2024, was $404,000, as compared to ($476,000) for the year ended December 31, 2023, representing an increase in costs of $880,000 mainly due to an agreement settlement occurring in 2023 representing 52% of the increase, interest and penalties related to late filing of historical taxes each representing approximately 20% of the increase, and the change in the derivate fair value which relates to 18% of the increase.

Liquidity and Capital Resources

Going Concern

As of December 31, 2024, we had an accumulated deficit of $87,084,000 and negative cash flow from operating activities for the year ended December 31, 2024 of $6,155,000.

Further, we have recurring losses with minimal revenue from operations and we expect to continue generate losses and using cash for operations.

While we are attempting to raise funds for commercialization, our monthly cash requirements during the year ended December 31, 2024 have been met through the sale of common stock and convertible notes.

These conditions raise substantial doubt about our ability to continue as a going concern.

Therefore, we may be unable to realize our assets and discharge our liabilities in normal course of business.

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

Subsequent to December 31, 2024, we raised $10.4 million of proceeds through the exercise of stock warrants and additional sales of our common stock.

For the next 12 months, we expect to continue to incur negative cash flows from operations as we continue to make targeted investments in sales and marketing and research and development of our next generation BNA Platform.

Beyond the next 12 months, our ability to achieve positive cash flow from operations depends on the commercialization of our flagship product, the BNA Platform.

We expect to incur significant costs for at least two to four years to commercialize and distribute our products, and we expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development and expand our production capabilities, as needed.

As a result, we will require significant capital to support our ongoing operations and to drive our business strategy before we can be profitable.

Until we can generate adequate revenues from the sale of our products to cover our operating expenses and capital expenditure requirements, we expect to finance our operations through the sale of equity, debt financing, or other sources.

There can be no guarantee that debt or equity financings will be available to us on commercially reasonable terms, if at all.

Additionally, we may be unable to further pursue our business plan and we may be unable to continue operations.

The report of our independent registered public accounting firm for the year ended December 31, 2024, states that there is substantial doubt about our ability to continue as a going concern.

The estimates and assumptions underlying our belief in the sufficiency of our capital resources in the short term and our ability to obtain capital resources in the long term may prove to be wrong, and we could exhaust our capital resources sooner than we expect and may not be able to obtain resources on favorable terms, or at all.

We have no material off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Summary of Cash Flow

The following table provides detailed information about our net cash flow for fiscal years ended December 31, 2024 and December 31, 2023:

For the year ended December 31,

(in thousands)

Net cash (used in) provided by

Operating activities

Investing activities

Financing activities

Operating Activities

For the year December 31, 2024, cash used in operating activities was $6,155,000, as compared to $2,172,000 for the year December 31, 2023 representing an increase of $3,983,000 or 183%.

This increase in net cash used in operating activities is primarily due to an increase in day-to-day operating costs, a reduction in liabilities, costs related to the Merger, prepayment of insurance policies and research costs associated with the development of the next generation of the BNA Platform.

Investing Activities

For the year December 31, 2024, net cash used in investing activities was $477,000, as compared to cash used in investing activities of $386,000 for the year December 31, 2023 representing an increase of $95,000 or 24%.

The increase in net cash used in investing activities which was primarily attributed to our investment into the development of the next generation BNA Platform and associated hardware.

Financing Activities

For the year December 31, 2024, net cash provided from financing activities was $6,299,000, as compared to $4,643,000 for the year December 31, 2023 representing an increase of $1,656,000 or 36%.

The increase was primarily due to the proceeds the convertible note entered into in December 2024.

Known Trends, Events, and Uncertainties

As with other companies that are in our industry, we will need to successfully manage normal business and scientific risks.

Research and development of new technologies is, by its nature, unpredictable.

We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable.

In addition, the emergence and effects of public health crises, such as endemics and epidemics are difficult to predict and the consequences of the ongoing war between Israel and Hamas, including related sanctions and countermeasures and the effects of such war on our employees in Israel, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.

Furthermore, other than as discussed in this filing, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations.

If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

Other than as discussed above and elsewhere in this filing, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

On October 29, 2024, the Audit Committee dismissed Turner, Stone & Company LLP (“Turner Stone”) as our independent registered public accounting firm, effective immediately.

The reports of Turner Stone on our consolidated financial statements for the years ended December 31, 2023, and December 31, 2022, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles, except that Turner Stone’s reports for the years ended December 31, 2023, and December 31, 2022, each contained an explanatory paragraph stating there was substantial doubt about the Company’s ability to continue as a going concern.

During the two most recent fiscal years ended December 31, 2023, and December 31, 2022, and the subsequent interim period through October 29, 2024, there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K of the Securities Exchange Act of 1934, as amended (“Regulation S-K”) and the related instructions to Item 304 of Regulation S-K) with Turner Stone on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Turner Stone, would have caused Turner Stone to make reference to the subject matter of the disagreements in connection with its reports on the Company’s consolidated financial statements for such years.

Also during this time, there were no “reportable events,” as defined in Item 304(a)(1)(v) of Regulation S-K, except that Turner Stone and our management identified material weaknesses in our internal control over financial reporting related to (i) lack of any documented flow charts or formal written procedures related to internal controls, (ii) lack of invoices and other documentation to support payments made to vendors and reimbursed expenses to contractors, and (iii) lack of sufficient documentation to show that journal entries are consistently reviewed and approved by someone other than the preparer.

We provided Turner Stone with a copy of the above disclosures and requested that Turner Stone furnish us with a letter addressed to the SEC stating whether or not it agrees with the statements made above.

A copy of Turner Stone’s letter dated December 31, 2024, is attached as Exhibit 16.1 to this filing of which it forms a part.

On October 31, 2024, the Audit Committee engaged Marcum Canada, LLP (“Marcum”) as our independent registered public accounting firm for the fiscal year ending December 31, 2024, effective immediately.

During the fiscal years ended December 31, 2023, and December 31, 2022, and the subsequent interim period through October 31, 2024, neither we nor anyone on our behalf has consulted with Marcum regarding (i) the application of accounting principles to any specified transaction, either completed or proposed or the type of audit opinion that might be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to us that Marcum concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matter that was either the subject of a “disagreement,” as defined in Item 304(a)(1)(iv) of Regulation S-K, or a “reportable event,” as defined in Item 304(a)(1)(v) of Regulation S-K.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

See the sections titled “ BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ” and “ w.

Recent accounting pronouncements ” in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10‑K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The full text of our audited consolidated financial statements begins on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity