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Item 9A. Controls and Procedures

2025-04-03 compared with 2024-03-20 · 1712 added, 1152 removed, 143 unchanged (95% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Office and Chief Financial Officer, and people performing similar functions, has evaluated the effectiveness of the design and operation of our controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period reported in this Annual Report (the “Evaluation Date”).

Based upon this evaluation, our Chief Executive Office and Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information required to be disclosed was accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rule 13a-15(b) of the Exchange Act, an evaluation as of December 31, 2023, was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of December 31, 2024, were not effective for the reasons stated below.

Management ’ s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act.

Internal control over financial reporting is a process designed under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets:

(ii) provide reasonable assurance (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting policies (b) our receipts and expenditures are being made only in accordance with authorizations of our management and directors:

and (c) regarding the prevention or timely detection of the unauthorized acquisition use or disposition of assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management, including the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, (the "Evaluation Date"), based on the criteria for effective internal control described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on its assessment, management concluded that our internal control over financial reporting was effective as of the Evaluation Date.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by our independent registered public accounting firm.

This report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

As of December 31, 2024, our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013).

Based on this evaluation, our management concluded that, as of December 31, 2024 our internal control over financial reporting was not effective for the reasons stated in the following paragraph.

During our evaluations of internal controls, we concluded that material weaknesses exist in our internal controls over financial reporting as outlined below.

These material weaknesses did not result in any identified misstatements and there were not changes to previously reported financial results.

(i) The Company does not have adequate Information Technology General Controls ("ITGCs") or related Information Produced by Entity (IPE) Controls resulting in transactional risk and subsequent downstream reporting risks;

(ii) The Company does not have a segregation of duties to ensure information is consistently reviewed and approved by someone other than the preparer;

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

Remediation Plan for the Material Weaknesses

Management is committed to the remediation of the material weakness described above beginning in the first quarter of 2025.

Management has implemented and will continue to implement measures designed to ensure that the control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively.

Remediation efforts include but are not limited to (a) developing, documenting and enhancing processes surrounding ITGCs, and (b) hiring / contracting additional resources to support the financial reporting process.

Management will test and evaluate the implementation of internal controls and revised processes to ascertain whether they are designed and operating effectively to provide reasonable assurance that they will prevent or detect a material error in our financial statements.

OTHER INFORMATION.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following sets forth certain information, as of February 29, 2024, about each member of our Board of Directors (the “Board”), including an account of their specific business experience;

the names of publicly held and certain other corporations of which they also are, or have been within the past five years, directors;

and a discussion of their specific experience, qualifications, attributes or skills that led to the conclusion that they should serve as directors.

Our Certificate of Incorporation provides that our Board is divided into three classes, Class I, Class II, and Class III, with members of each class typically serving staggered three-year terms.

Name of Director

Director Since

Position with the Company

James Benoit Jr.

Director, CEO and Chairman

Becker , Rear Admiral, USN (ret), age 62, is a former Naval Intelligence Officer and senior executive with a unique combination of business, military, cyber and leadership experience.

As the CEO of “The Becker T3 Group” consultancy he founded in 2016, he leverages an outstanding network of U.S.

and international security leaders to provide clients with an understanding of National Security trends and activities.

He’s successfully developed and implemented all-source intelligence strategies for large, diverse international teams.

From 2016 to 2017, Paul led the Presidential Transition’s Intelligence Community Landing Team which provided policy input, strategic guidance and operational counsel to a new administration.

He served as Director of Intelligence for the Joint Chiefs of Staff beginning in 2013.

Additional military service includes Director of Intelligence for the U.S.

Pacific Command in Hawaii and the International Security Assistance Force Joint Command in Afghanistan, commanding officer of CENTCOM’s Joint Intelligence Center in Tampa, and Assistant Naval Attaché to France.

Rear Admiral Becker is the recipient of the National Intelligence Community and Department of Defense’s Distinguished Service Medals, and the Ellis Island Medal of Honor.

The Naval Intelligence Community recognized RADM Becker in 2016 by establishing the “Teamwork, Tone, Tenacity” leadership award in his honor.

He holds a Master’s degree in Public Administration from Harvard's Kennedy School of Government and a Bachelor of Science from the U.S.

Naval Academy.

A dynamic public speaker and author, his articles and presentations have been widely published.

James Benoit, Jr.

age 52 , has spent his career devoted to the intelligence and national security missions of the United States.

From 2009 to 2019, he served as the CEO of FedData and Domain5, a pair of technology companies supplying secure hardware, engineering, analytics, network engineering and computer network operations support services to the National Intelligence Community and the Department of Defense.

On his watch, FedData grew from start-up to nearly $500 million in revenue and over $30 million in earnings.

Benoit led FedData through the acquisition of a distressed asset and successfully turned the asset around.

He sold FedData in 2018, earning the stockholders and private equity partners an IRR greater than 80%.

Benoit secured over $300 million in asset-based credit facilities, $40 million in revolving facilities and over $75 million in senior unsecured debt.

Benoit most recently led FedData through the successful capture of a 5-year, more than $500 million, contract supporting the intelligence community.

Benoit retired as CEO of FedData in December 2019.

Prior to becoming FedData’s CEO, Mr.

Benoit’s career spanned distinguished service as an officer in the United States Army, important work in civilian government, and work in the private sector.

A licensed attorney, he spent several years at prominent law firms where he worked on a range of matters including corporate formation, mergers and acquisitions, securities, leveraged buyouts, banking and finance.

Benoit is a graduate of St.

Mary’s College of Maryland, the University of Baltimore and the Georgetown University Law Center.

A lifelong resident of Annapolis, he lives with his wife and three children.

“ Chip ” DiPaula, Jr.

, age 61, is Co-President of the Digital Commerce Division of Ascential plc.

DiPaula is Co-Founder of Flywheel Digital, a pioneering digital advertising firm that optimizes ecommerce sales for the world’s largest brands.

Flywheel was acquired in 2018 by Ascential, plc.

DiPaula’s public sector experience includes serving as Chief of Staff to the Governor of Maryland from 2005 to 2007 and serving as the youngest Secretary of the Maryland Department of Budget & Management in state history from 2003 to 2005.

In this capacity, he oversaw development of a $26 billion state budget and resolved $4 billion in budget deficits through performance-based budgeting.

DiPaula received his Bachelor of Science degree in Business Administration from Towson University.

, 67, is the CEO and Managing Partner for Jack Johnson and Associates, a strategic consulting firm located in McLean, VA.

The firm specializes in providing business and risk consulting to clients domestically and internationally, particularly in the areas of business risk, pre- and post-sale merger and acquisition support, business integration as well as in-depth security assessments.

Previously he was a Partner and Sector Leader with Guidehouse Consulting, and its legacy firm, PricewaterhouseCoopers (PwC), where he led the firm’s large Defense Sector Practice after previously serving as Sector Leader for its Homeland Security and Law Enforcement sector.

Before joining PwC in 2005, Mr.

Johnson served as the first Chief Security Officer (CSO) for the newly formed Department of Homeland Security (DHS).

In this capacity, he was directly involved in the establishment of DHS after 9/11 and integrating the 22 agencies that now comprise the Department.

His previous government service before his appointment at DHS consisted of over 20 years with the United States Secret Service, rising to the position of Deputy Assistant Director, and serving in a wide range of managerial and executive assignments of increasing responsibility and complexity.

His career included the full range of investigative, protective, and intelligence-related duties, both domestically and internationally, as well as assignments with various Presidents, Vice Presidents, Presidential candidates, and foreign heads of state.

Prior to being commissioned as a Secret Service Agent in 1983, he was a Police Officer and Detective for Fairfax County, Virginia Police Department, and also is a veteran of the United States Army.

Johnson received his Bachelor of Science degree from the University of Maryland, a Master’s in Forensic Science degree from George Washington University and has completed additional post-graduate study at the University of Virginia and Johns Hopkins School of Management.

He has previously testified on multiple occasions before Congress on homeland security and national security-related issues and is a frequent speaker at many national and international conferences, seminars, and symposiums.

Pickle , 74, is a government affairs/business development consultant with over 30 years of experience at senior levels within the federal government.

Since 2007, Mr.

Pickle has served as President of The Pickle Group, LLC, a Washington DC-based business development company.

Pickle served as the 37th Sergeant at Arms (SAA) of the United States Senate.

Pickle was nominated for this senior position by Senate Majority Leader Bill Frist and elected by the Senate in March 2003.

He was re-elected in January 2005.

In this position, Mr.

Pickle served as the Senate's Chief Operating Officer, Chief of Protocol, Chief of Security;

and managed over 950 Senate employees and an annual budget exceeding $200 million.

Pickle worked closely with Senators, Committees and senior Senate staff on a daily basis.

In addition, as the SAA, he served as Chairman of the U.S.

Capitol Police Board with direct oversight for a 2200 person police department with a budget of $300 million.

Prior to his Senate service, Mr.

Pickle served in several Senior Executive Service (SES) positions within the Executive Branch, which included being the first SES Director of the Transportation Security Administration and a Deputy Inspector General of the Department of Labor.

Pickle's career was spent with the United States Secret Service where he rose steadily through the ranks from Special Agent to Senior Executive.

Pickle served as Executive Assistant Director responsible for the Congressional and Legislative Affairs program of the Secret Service from 1991 to 1998.

Pickle is a decorated Vietnam War Veteran who served with the 1st Cavalry Division in 1968-69.

Among his awards are the Bronze Star, Purple Heart, 7 Air Medals (2 for valor), 3 Army Commendation Medals, Vietnamese Cross of Gallantry, and the Combat Infantry Badge.

Pickle served on the President's Medal of Valor Award Committee and currently serves on numerous not-for-profit and corporate boards.

He was a member of the 2004 Presidential Election Advisory Committee.

Wachtel , 68, is a principal of Wachtel & Co., Inc., a boutique investment firm based in Washington, D.C.

Her career spans investment banking, valuation consulting, and oversight of financial reporting and internal controls.

Wachtel has been a director of six Nasdaq-listed companies since joining her firm in 1984, and currently serves on the Board of VSE Corporation (VSEC), a provider of engineering services principally to federal government clients.

From November 2013 through 2021, she was a director of The ExOne Company, (XONE), a global provider of 3D printing machines, products, and services.

Her securities industry experience includes service on the Advisory Committee for the National Market System Consolidated Audit Trail, LLC, an entity created by order of the SEC, and ten years on the Hearing Panel for Nasdaq Listing Qualifications.

Wachtel holds B.A.

degrees from the University of Chicago and a J.D.

from the University of Virginia.

She is a Chartered Financial Analyst (CFA).

Wachtel is a trusted resource with regard to business strategy, public markets, merger and acquisition opportunities, corporate governance, regulatory compliance, and risk management.

Given her background and occupation, she is qualified to be the audit committee’s financial expert.

Executive Officers

The following table sets forth the name, age (as of February 29, 2024) and position of each of our executive officers.

Name of Executive Officer

Position With Company

James Benoit, Jr.

Chief Executive Officer and Chairman

Directors and Executive Officers

The following sets forth information about our directors and executive officers:

Greg Lipschitz

Chief Executive Officer

Paul Krzywicki

Chief Financial Officer

James Benoit, Jr , was appointed Chairman and Chief Executive Officer in August 2021.

See description under directors above.

Hannon , was appointed Chief Financial Officer on September 29, 2021.

From June 2021 until his permanent appointment as CFO, Mr.

Hannon had been a Managing Director at GlassRatner Advisory & Capital Group, LLC d/b/a B.

Riley Advisory Services.

From March 2017 until June 2021, Mr.

Hannon served as VP Finance & Corporate Controller and then as Chief Financial Officer of Ready Pac Foods, Inc.

(“RPF”) d/b/a Bonduelle Fresh Americas, a wholly owned subsidiary of Bonduelle SA, a French publicly traded company.

From May 2016 to March 2017, Mr.

Hannon was an outside consultant to RPF in connection with Bonduelle’s acquisition of RPF.

Prior thereto, Mr.

Hannon was the chief financial officer for several privately held enterprises.

He began his career with Arthur Andersen & Co.

in New York where he was primarily assigned to audits of publicly traded companies.

Hannon graduated from the State University of New York at Albany with a bachelor’s degree in accounting and is a certified public accountant.

Chief Technology Officer

Chairman of the Board

David DeCaprio

Greg Lipschitz .

Lipschitz has served as Firefly’s director since August 2024.

From December 2024 to March 2025, Mr.

Lipschitz served as the Executive Chairman of the Company .

On January 6, 2025, Mr.

Lipschitz was appointed as the Interim Chief Executive Officer of the Company.

On March 26, 2025, Mr.

Lipschitz was appointed as the Chief Executive Officer of the Company.

Lipschitz has over 15 years of combined experience in private equity, merchant banking, capital markets and advising high growth businesses.

Since June 2018, Mr.

Lipschitz served as the Managing Director of 2686225 Ontario Inc.

From June 2018 to February 2024, Mr.

Lipschitz served as the Vice President of Lazer Capital.

Lipschitz is currently the Managing Director of Old Stone Advisors, a consulting and financial advisory firm.

Lipschitz has advised high growth companies on over $1 billion of transactions.

Lipschitz is a Chartered Financial Analyst and received his bachelor’s degree in Business from the Richard Ivey Business School at the University of Western Ontario.

Firefly believes that Mr.

Lipschitz is qualified to serve on its board of directors due to his experience in capital markets which will make him an asset to the Company.

Paul Krzywicki.

Krzywicki, CPA, CGA has served as Firefly’s Chief Financial Officer since March 2024.

Krzywicki initially joined Firefly as its Controller in November 2023 before his appointment as our Chief Financial Officer in March 2024.

Over the last 5 years, Mr.

Krzywicki has held senior leadership positions in a variety of organizations such as Nucor Canada, EllisDon and Canadian Curtis Refrigeration with a focus on modernization and increasing operating efficiency.

Krzywicki is a Chartered Professional Accountant and holds an Honours Bachelors Degree in Commerce from Laurentian University.

Gil Issachar .

Issachar has served as Firefly’s Chief Technology Officer since November 2022.

Issachar is a biomedical engineer and a neuroscientist with an extensive experience working as a director of data-science, team leader, data scientist, and software engineer in the medical device industry (under FDA PMA regulations).

Issachar has managed multiple research and development projects in collaboration with pharmaceutical companies, neuroscientists and other start-up companies.

Prior to serving as Firefly’s Chief Technology Officer, Mr.

Issachar served as Firefly’s Vice-President of Research and Data Science from December 2019 to August 2021, Director of Research and Data-Science from December 2019 to August 2021, Data-Science Team Leader from April 2018 to December 2019.

From July 2013 to March 2017, Mr.

Issachar served as R&D Software Engineer for Dune Medical Devices.

Issachar received his Master’s Degree in Biomedical/Medical Engineering and Bachelor’s Degree from Tel Aviv University.

Arun Menawat .

Menawat has served as Firefly’s Chairman since March 2025 and Firefly’s director since August 2024.

Menawat has an accomplished history of executive leadership success in the healthcare industry.

Since August 2026, Dr.

Menawat is the Chief Executive Officer and a Director of Profound Medical Corp.

Prior to joining Profound, Dr.

Menawat served as the Chairman, President and CEO of Novadaq Technologies Inc., a TSX and Nasdaq listed company that marketed medical imaging and therapeutic devices for use in the operating room.

From July 1999 to March 2023 , Dr.

Menawat was President, Chief Operating Officer and Director of Cedara Software Ltd, a publicly listed medical imaging software company.

Menawat’s educational background includes a Bachelor of Science in Biology from the University of District of Columbia, Washington, D.C., and a Ph.D.

in Chemical Engineering from the University of Maryland, College Park, MD, including graduate research in Biomedical Engineering from the National Institute of Health, Bethesda, MD.

Menawat also earned an Executive M.B.A.

from the J.L.

Kellogg School of Management, Northwestern University, Evanston, IL.

Firefly believes that Mr.

DeCaprio is qualified to serve on its board of directors due to his extensive experience in artificial intelligence and software engineering which will make him an asset to the Company.

David DeCaprio .

DeCaprio has served as a member of Firefly’s board of directors since August 2024.

DeCaprio has served in various capacities within the genome research, pharmaceutical development, health insurance, computer vision, sports analytics, speech recognition, transportation logistics, operations research, real-time collaboration, robotics and financial industries since 2003.

DeCaprio has significant experience transitioning advanced technology from academic research labs into successful businesses.

Since April 2024, Mr.

DeCaprio has served and continues to serve as Chief Technology Officer of mbue.ai, a venture-backed AI startup in the architecture, engineering, and construction space.

From January 2017 to December 2023, Mr.

DeCaprio has served as Chief Technology Officer of ClosedLoop.ai, an award-winning startup focused on building a healthcare specific data science and machine learning platform.

Prior to founding ClosedLoop.ai, Mr.

DeCaprio was involved in various successful startups.

Among other positions, Mr.

DeCaprio has served as Chief Technology Officer of Fina Technologies from June 2008 to January 2015 and as Vice President of Engineering of GNS Healthcare from September 2005 to January 2017.

Since May 2015, Mr.

DeCaprio has served and presently serves as Chief Executive Officer of Cizr, a technology company focused on improving sports coaching efficiency.

DeCaprio also has significant consulting experience, serving as a consultant for various organizations from 2006 to January 2015, for Baylor College of Medicine from January 2015 to June 2015 and for the Icahn School of Medicine at Mount Sinai from September 2016 to April 2017.

DeCaprio received a Bachelor of Science Degree in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology.

Firefly believes that Mr.

DeCaprio is qualified to serve on its board of directors due to his extensive experience in artificial intelligence and software engineering which will make him an asset to the Company.

Brian Posner.

Posner has served as Firefly’s director since August 2024.

Posner has served as Chief Financial Officer at several life science and emerging technology companies.

He served as the Chief Financial Officer of electroCore, Inc.

ECOR) (“electroCore”), a commercial stage bioelectronic medicine and wellness company from April 2019 to October 2024.

Posner currently serves as a consultant to electroCore.

Prior to electroCore, Mr.

Posner served as Chief Financial Officer of Cellectar Biosciences, Alliqua BioMedical, Ocean Power Technologies, Power Medical Interventions and Pharmacopeia.

Posner holds an undergraduate degree in accounting from Queens College and an M.B.A.

in managerial accounting from Pace University.

Firefly believes Mr.

Posner’s extensive experience in public markets will make him an asset to the Company.

Stella Vnook, Ph.D .

Vnook has served as Firefly’s director since August 2024.

Vnook has served as a Chief Executive Officer, founder, board member, C-Suite advisor with 25 years’ experience driving transformational change for global clinical development portfolios from early-stage R&D to commercialization.

She has an extensive background in building and managing successful start-up ventures, commercial scale-up, strategy and execution to support brand launch, research and development, acceleration, IP strategy, Corporate Board selection and formation, business development and investment strategy, venture capital initiatives, as well as managed markets and healthcare economics.

Vnook’s experience includes serving as Chief Executive Officer of Likarda since April 2023;

director, founder and president of Oral Biolife since April 2022;

founder, president and executive advisor at Agile Consulting Group since March 2015;

and Mentor-In-Residence and Entrepreneur-in-Residence at Pennsylvania State University since April 2024.

Firefly believes that Dr.

Vnook’s extensive experience in executive leadership roles in the pharmaceutical industry will make her an asset to the Company.

Family Relationships

There are no family relationships among any of our directors or executive officers.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company.

Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company, there were no officers, directors and 10% beneficial owners who failed to file on a timely basis the forms required under Section 16(a) of the Exchange Act during our 2023 fiscal year.

Code of Business Conduct and Ethics

We have adopted a code of ethics that applies to our directors, officers, and employees The code of ethics is available on our website at www.wavedancer.com on the Governance Documents page under the Investors heading.

Any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

Procedures for Stockholder Nominations to the Board of Directors

Under our bylaws, a stockholder (“Proposing Stockholder”) must provide written notice to the Secretary of the Company at the principal executive offices of the Corporation:

(x) not later than the close of business on the 90th day, nor earlier than the close of business on the 120th day, in advance of the anniversary of the previous year's annual meeting if such meeting is to be held on a day which is not more than 30 days in advance of the anniversary of the previous year's annual meeting or not later than 60 days after the anniversary of the previous year's annual meeting;

and (y) with respect to any other annual meeting of stockholders, not earlier than the close of business on the 120th day prior to the annual meeting and not later than the close of business on the later of:

(1) the 90th day prior to the annual meeting and (2) the close of business on the tenth day following the first date of public disclosure of the date of such meeting.

The Proposing Stockholder’s notice must include:

the name, age, business address, and residence address of each nominee proposed in such notice;

the principal occupation or employment of each such nominee;

the class and number of shares of capital stock of the Company which are owned of record and beneficially by each such nominee (if any);

such other information concerning each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved) or that is otherwise required to be disclosed, under Section 14(a) of the Exchange Act;

a written questionnaire with respect to the background and qualification of such proposed nominee (which questionnaire shall be provided by the Secretary upon written request) and a written statement and agreement executed by each such nominee acknowledging that such person:

consents to being named in the Company's proxy statement as a nominee and to serving as a director if elected,

intends to serve as a director for the full term for which such person is standing for election, and

as to the Proposing Stockholder:

the name and address of the Proposing Stockholder as they appear on the Company’s books and of the beneficial owner, if any, on whose behalf the nomination is being made,

the class and number of shares of the Company which are owned by the stockholder (beneficially and of record) and owned by the beneficial owner, if any, on whose behalf the nomination is being made, as of the date of the Proposing Stockholder's notice, and a representation that the Proposing Stockholder will notify the Company in writing of the class and number of such shares owned of record and beneficially as of the record date for the meeting within five business days after the record date for such meeting,

a description of any agreement, arrangement, or understanding with respect to such nomination between or among the Proposing Stockholder or the beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that the Proposing Stockholder will notify the Company in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the record date for such meeting,

a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Proposing Stockholder's notice by, or on behalf of, the Proposing Stockholder or the beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of such person or any of their affiliates or associates with respect to shares of stock of the Corporation, and a representation that the Proposing Stockholder will notify the Company in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the record date for such meeting,

representation that the Proposing Stockholder is a holder of record of shares of the Company entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, and

a representation whether the Proposing Stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve the nomination and/or otherwise to solicit proxies from stockholders in support of the nomination.

There are no family relationships among any of our officers or directors.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity;

been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.

78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.

1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Material Changes to Director Nomination Procedures

There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last disclosed.

Corporate Governance

Composition of the Board of Directors

Our business and affairs are organized under the direction of the Board.

The Board consists of five (5) members.

The primary responsibilities of the Board are to provide oversight, strategic guidance, counseling and direction to our management.

The Board meets on a regular basis and additionally as it deems necessary.

In accordance with the terms of the Charter, the Board is divided into three classes, Class I, Class II and Class III, with only one class of directors being elected in each year and each class serving a three-year term, except as described below.

The Class I directors consist of David DeCaprio and Greg Lipschitz, to serve until the annual meeting of stockholders to be held in 2027, or until each one’s respective successor has been duly elected and qualified.

The Class II directors consist of Brian Posner and Stella Vnook, whose terms will expire at the second annual meeting of stockholders to be held following the filing of the Amended and Restated Certificate of Incorporation ( the “Filing Date”).

The Class III director consists of Arun Menawat, whose term will expire at the third annual meeting of stockholders to be held following the Filing Date.

At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following their election and until their successors are duly elected and qualified.

This classification of the Board may have the effect of delaying or preventing changes in our control or management.

There is no cumulative voting with respect to the election of directors.

Board Leadership Structure

Director Independence

We are required to comply with Nasdaq’s rules in determining whether a director is independent.

The Board undertook a review of the independence of the individuals named above and determined that each of the directors except Greg Lipschitz qualify as “independent” as defined under the applicable Nasdaq rules.

The Nasdaq definition of “independence” includes a series of objective tests, such as the director or director nominee is not, and was not during the last three years, our employee and has not received certain payments from, or engaged in various types of business dealings with us.

In addition, the Board has made a subjective determination that no relationships exist which, in the opinion of the Board, would interfere with such individual’s exercise of independent judgment in carrying out his or her responsibilities as a director.

In making these determinations, the Board has reviewed and discussed information provided by the directors with regard to each director’s business and personal activities as they may relate us and our management.

With respect to its analysis of Mr.

Lipschitz’s independence, the Board considered that certain strategic agreement, dated as of August 12, 2024, by and between us and Bower Four Corp.

(the “Lipschitz Agreement”).

Pursuant to the Lipschitz Agreement, Mr.

Lipschitz, through Bower Four Corp., is entitled to receive aggregate consideration of $950,000 in shares of Common Stock during the term of the Lipschitz Agreement comprised of up to $316,667 of annual service credits over three years, as defined in the Lipschitz Agreement.

Committees of the Board of Directors

The Board established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

The composition and responsibilities of each of the committees of the Board are described below.

Members serve on these committees until their resignation or until otherwise determined by the Board.

The Board may establish other committees as it deems necessary or appropriate from time to time.

Audit Committee

We have a separately designated standing audit committee.

This committee currently has three members, Bonnie K.

Wachtel (Chairperson), James C.

DiPaula, Jr., and Paul B.

Our Audit Committee has the authority to retain and terminate the services of our independent registered public accountants, reviews annual financial statements, considers matters relating to accounting policy and internal controls, and reviews the scope of annual audits.

All members of the Audit Committee meet the current independence standards promulgated by the SEC and by the NASDAQ Stock Market;

as such standards apply specifically to members of audit committees.

The Board has determined that Ms.

Wachtel is our “audit committee financial expert,” as the SEC has defined that term in Item 407 of Regulation S-K.

The current audit committee charter is available for viewing on our Web site at www.wavedancer.com on the Governance Documents page under the Investors heading.

The Audit Committee of the Board (the “Audit Committee”) consists of Brian Posner, David DeCaprio and Stella Vnook.

The Board has determined that each member of the Audit Committee qualifies as “independent” under Nasdaq listing standards and Rule 10A-3(b)(1) of the Exchange Act.

The chairperson of the Audit Committee is Brian Posner.

The Board has determined that Brian Posner is an “audit committee financial expert” within the meaning of SEC regulations.

Each member of our Audit Committee can read and understand fundamental financial statements in accordance with applicable requirements.

In arriving at these determinations, the Board has examined each audit committee member’s scope of experience and the nature of their employment.

For further related discussion, see Item 13.

“ Certain Relationships and Related Transactions, and Director Independence – Director Independence – Committees of the Board of Directors ”.

Code of Ethics and Business Conduct

We have adopted a Code of Ethics and Business Conduct that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer.

Such Code of Ethics and Business Conduct addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of our Code of Ethics and Business Conduct.

The full text of our Code of Ethics and Business Conduct is posted on our website at fireflyneuro.com .

Any waiver of our Code of Ethics and Business Conduct for directors or executive officers must be approved by our Audit Committee.

We will disclose future amendments to our Code of Ethics and Business Conduct, or waivers from our Code of Ethics and Business Conduct for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our website within four business days following the date of the amendment or waiver.

In addition, we will disclose any waiver from our Code of Ethics and Business Conduct for our other executive officers and our directors on our website.

A copy of our Code of Ethics and Business Conduct will also be provided free of charge upon request to:

Secretary, Firefly Neuroscience, Inc., 1100 Military Road, Kenmore, NY 14217.

Compensation Committee Interlocks and Insider Participation

None of our Compensation Committee members is or has ever been our executive officer or employee.

None of our executive officers currently serve, or have served during the last completed fiscal year, on the Compensation Committee or the Board of any other entity that has one or more executive officers that will serve as a member of the Board or Compensation Committee.

See “Certain Relationships and Related Person Transactions.”

Limitation on Liability and Indemnification of Directors and Officers

The Charter provides that directors and officers will be indemnified by us to the fullest extent authorized by Delaware law as it now exists or may in the future be amended.

The Charter provides that directors will not be personally liable for monetary damages to us except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended.

We have entered into agreements with our officers and directors to provide contractual indemnification.

The Bylaws permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit indemnification.

We have purchased directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify the directors and officers.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors and executive officers and beneficial holders of more than 10% of our shares of common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our equity securities.

We believe, based solely on a review of the copies of such reports furnished to us and representations of these persons, that all reports were timely filed for the year ended December 31, 2024.

EXECUTIVE COMPENSATION.

The Summary Compensation Table below sets forth compensation information for (i) those individuals who served as the Chief Executive Officer during 2023, (ii) up to two other individuals serving as executive officers on December 31, 2023 and (iii) up to two additional individuals for whom disclosure would have been provided under (ii) hereof but for the fact they were not serving as an executive officer on December 31, 2023 (collectively “Named Executive Officers”):

Summary Compensation Table

Name and principal

compensation 3

James Benoit Jr.

Chief Executive Officer

Summary Compensation Table - Years Ended December 31, 2024 and 2023

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods.

No other executive officers received total compensation in excess of $100,000 during the fiscal year ended December 31, 2024.

Former Chief Executive Officer

Stephen Purcell (2)

Former Chief Financial Officer

Chief Technology Officer

Former Chief Medical Officer

Former Executive Chairman

Paul Krzywicki

Chief Financial Officer

During 2022 Mr.

Benoit and Mr.

Hannon elected to forego portions of their salaries and received stock option awards instead.

The salary amounts foregone and included in column (c) for Mr.

Benoit was $89,870 and for Mr.

Hannon was $25,000.

Benoit and Mr.

Hannon were granted 36,000 stock options and 4,000 stock options, respectively, on November 21, 2022.

See note 2 below for further details on these grants.

Amounts in column (f) reflect the aggregate grant date fair value computed in accordance with ASC Topic 718 of the options to purchase shares of our common stock.

These amounts do not represent amounts the named executive officers received or are entitled to receive.

The assumptions used in the valuation of these awards can be found in Note 13 to our consolidated financial statements.

The amounts do not reflect the risk the awards may be forfeited in certain circumstances and, for awards that are subject to performance conditions, the risk there is no payout because the performance conditions are not met.

The vesting of all option awards granted to executive officers in 2023 and 2022 are subject only to the term of service.

The 2023 option awards for Mr.

Benoit represents an award of 12,500 options on November 3, 2023, exercisable at $2.03 per share with approximately 4,167 shares exercisable on each of October 28, 2024, 2025 and 2026., and expiring on October 31, 2028.

The 2022 option award for Mr.

Benoit represents an award of 36,000 options on November 21, 2022, exercisable at $8.60 per share with 12,000 shares exercisable on each of November 21, 2023, 2024 and 2025, and expiring on November 21, 2032.

The 2023 option awards for Mr.

Hannon represents an award of 12,500 options on November 3, 2023, exercisable at $2.03 per share with approximately 4,167 shares exercisable on each of October 28, 2024, 2025 and 2026, and expiring on October 31, 2028.

The 2022 option awards for Mr.

Hannon represent an award of 25,000 shares on March 22, 2022, exercisable at $49.90 per share with 7,500 shares exercisable on each of March 22, 2023, 2024 and 2025, and expiring on March 22, 2032, and an award of 4,000 options on November 21, 2022, exercisable at $8.60 per share with approximately 1,333 shares exercisable on each of November 21, 2023, 2024 and 2025, and expiring on November 21, 2032.

Amounts in column (i) are for employer matching contributions to each individual’s 401(k) defined contribution account under our company-wide 401(k) Pension and Profit-Sharing Plan.

Employment Contracts, Termination of Employment and Change-in-Control Arrangements

On August 26, 2021, an employment agreement was executed between the Company and G.

James Benoit, Jr., who was named as the Chief Executive Officer of the Company.

Under the agreement, Mr.

Benoit initially received a base salary of $60,000, which may be adjusted periodically by the board of directors, with eligibility to receive an annual performance bonus up to 100% of his base salary based on measurement standards to be determined by the Board’s compensation committee.

Under the agreement, Mr.

Benoit was granted options to purchase 3,000 shares of Company’s common stock under its 2016 Stock Incentive Plan and 100,000 options upon the adoption of its 2021 Stock Incentive Plan.

The board of directors voted on March 18, 2022, with an effective date of the same, to increase Mr.

Benoit’s base rate of pay by $107,500, and to further increase his base rate of pay by an additional $107,500 effective August 26, 2022, the anniversary date of his employment agreement.

In the event of Mr.

Benoit’s termination other than for Cause, death, disability, or by Mr.

Benoit Without Good Reason (as defined in the agreement), he is entitled to receive pro-rated bonus, severance payments at the same rate as the base salary for a period of twelve months following the date of termination, and continued participation in all benefit plans for which he is legally eligible during the severance period.

On March 22, 2022, an employment agreement was executed between the Company and Timothy G.

Hannon, who was named as the Chief Financial Officer of the Company.

Under the agreement, Mr.

Hannon receives a base salary of $270,000, with eligibility to receive an annual performance bonus up to 50% of his base salary based on measurement standards to be determined by the Board’s compensation committee.

In the event of Mr.

Hannon’s termination other than for Cause, death, disability, or by Mr.

Hannon Without Good Reason (as defined in the agreement), he is entitled to receive pro-rated bonus, severance payments at the same rate as the base salary for a period of twelve months following the date of termination, and the Company will pay for Mr.

Hannon’s COBRA coverage during the severance period, if eligible.

The following table sets forth the outstanding equity awards as of December 31, 2023 for the Named Executive Officers of the Company:

unexercisable (c)

James Benoit Jr.

One half vest on each of November 21, 2024 and 2025.

Vests on August 26, 2024.

One-third vests on each of October 31, 2024, 2025, and 2026.

7,500 shares vest on each of March 22, 2024 and 2025.

Each Named Executive Officer is a salaried employee, without any guaranteed incentives.

Bonuses and stock option awards are at the discretion of the Compensation Committee of the Board of Directors.

Executive officers are eligible to participate in the WaveDancer 401(k) Pension and Profit-Sharing Plan under the same terms and matching percentages as other salaried employees.

The Company has no outstanding stock awards to any executive officer.

Retirement Plans

The Company has a Cash or Deferred Arrangement Agreement (CODA), which satisfies the requirements of section 401(k) of the Internal Revenue Code.

This defined contribution retirement plan covers substantially all employees.

Participants can elect to have up to the maximum percentage allowable of their salaries reduced and contributed to the plan.

The Company may make matching contributions equal to a discretionary percentage of the participants’ elective deferrals.

In 2023, the Company matched 25% of the first 6% of the participants’ elective deferrals.

The Company may also make additional contributions to all eligible employees at its discretion.

The Company did not make additional contributions during 2023.

Compensation of Directors

For the year ended December 31, 2023, the Company paid each non-employee director a quarterly fee of $3,750 per quarter to serve on the board and an additional $1,250 for non-employee committee chairpersons.

Options to purchase shares of common stock may be issued in addition to the director’s annual fee.

Expenses incurred in attending Board of Director meetings and committee meetings may be reimbursed.

The following Table describes all compensation for each director for the year ended December 31, 2023.

Had an aggregate amount of 11,000 options outstanding as of December 31, 2023.

Had an aggregate amount of 10,000 options outstanding as of December 31, 2023.

Had an aggregate amount of 12,000 options outstanding as of December 31, 2023.

Had an aggregate amount of 15,000 options outstanding as of December 31, 2023.

Had zero options outstanding as of December 31, 2023.Resigned as a director effective March 20, 2023.

Had zero options outstanding as of December 31, 2023.

Resigned as a director effective July 5, 2023.

Had an aggregate amount of 14,000 options outstanding as of December 31, 2023.

Amounts reflect the full grant-date fair value of option awards granted during the relevant fiscal year computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual.

The aggregate grant date fair value was computed in accordance with ASC Topic 718 based on the assumptions described in Part II.

“Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Policies – Stock-Based Compensation”.

On March 7, 2024, Stephen Purcell resigned as our Chief Financial Officer upon the appointment of our current Chief Financial Officer, Paul Krzywicki

Consists of a restricted share units to purchase valued at $200,000 to Mr.

Olsen, our former Chief Executive Officer, on July 8, 2023.

These shares units vest once the Company lists on a recognized North American Stock Exchange.

Olsen was removed from his position as the Company’s Chief Executive Officer by the Board without cause on January 6, 2025.

Consists of a restricted share units to purchase valued at $200,000 to Mr.

Issachar on July 8, 2023.

These share units vest once the Company lists on a recognized North American Stock Exchange.

Consists of a grant of options to purchase 75,417 shares of Common Stock made to Mr.

Olsen on July 8, 2023, of which 47,241 are exercisable as of December 31, 2024.

The options have a term of 5 years and an exercise price equal to a 25% discount to the issue price of Firefly's equity securities in an initial public offering that results in our Common Stock being listed on the Nasdaq Stock Market or another recognized securities exchange or traded on the over-the-counter market.

Consists of a grant of options to purchase 11,037 shares of Common Stock made to Mr.

Purcell on July 8, 2023, of which 0 are exercisable as of December 31, 2024.

Consists of a grant of options to purchase 75,417 shares of Common Stock made to Mr.

Issachar on July 8, 2023, of which 47,241 are exercisable as of December 31, 2024.

Consists of a grant of options to purchase 8,320 shares of Common Stock made to Mr.

Kaba on June 10, 2024, of which 1,572 are exercisable as of December 31, 2024.

Consists of a grant of options to purchase 11,024 shares of Common Stock made to Mr.

Krzywicki on March 1, 2024, of which 3,113 are exercisable as of December 31, 2024.

Management Employment and Consulting Agreements

We have entered into written employment agreements or other arrangements with Gil Issachar, Paul Krzywicki and Greg Lipschitz and prior to Stephen Purcell’s resignation, we had entered into a consulting agreement with ElMindA Ltd., pursuant to which Mr.

Purcell served as our Chief Financial Officer.

The material terms of the employment agreements or other arrangements with such individuals, as applicable and as currently in effect, are summarized below.

Gil Issachar, Chief Technology Officer

Effective February 2, 2017, we and Mr.

Issachar entered into an employment agreement, which was subsequently amended by four amendments dated April 28, 2018, December 16, 2018, July 1, 2019 and December 11, 2019, respectively, each of which raised Mr.

Issachar’s base salary in connection with promotions or other events, and that certain Contract Addendum, dated June 21, 2021 (such agreement, as amended, the “Issachar Employment Agreement”), pursuant to which Mr.

Issachar was hired as a research and data scientist.

Issachar now serves as our Chief Technology Officer.

Under the Issachar Employment Agreement, as amended, Mr.

Issachar is entitled to a monthly base salary of approximately $13,340 on an as-converted basis in U.S.

Issachar also received bonus compensation in the form of a one-time lump-sum cash payment equal to two months of salary in 2021, pursuant to the addendum to the Issachar Employment Agreement.

Issachar will also be entitled to an annual bonus in the amount of one month’s salary at the end of each calendar year.

Firefly also agrees to provide contributions for the cost of pension and education funds, managers’ insurance, disability policies, and other benefits for Mr.

Issachar during the term of employment under the Issachar Employment Agreement.

Issachar’s employment with us pursuant to the Issachar Employment Agreement commenced as of the effective date of the Issachar Employment Agreement and will continue until terminated by either party, with such termination effective upon the provision of written notice to the other party.

In any event of termination of employment by applicable prior written notice, Firefly shall be entitled to terminate Mr.

Issachar’s employment, immediately or at any time during the prior notice period, and in such event, if and to the extent required by applicable law, Firefly shall pay Mr.

Issachar full or partial prior notice redemption, as applicable.

Notwithstanding the foregoing, in the event of termination of the Issachar Employment by us for cause, we shall not be required to pay the redemption of the advance notice period.

The Issachar Employment Agreement also contains certain standard confidentiality and assignment of inventions provisions.

Paul Krzywicki, Chief Financial Officer

On November 13, 2023, we entered into a consulting agreement with Paul Krzywicki (the “Krzywicki Consulting Agreement”), pursuant to which Mr.

Krzywicki acted as controller of the Company.

Krzywicki now serves as our Chief Financial Officer.

Under the Krzywicki Consulting Agreement, Mr.

Krzywicki is entitled a monthly payment of approximately $7,845 on an as-converted basis in U.S.

dollars and the Company shall reimburse Mr.

Krzywicki for all reasonable ordinary and customary business expenditures incurred in connection with his service provided to the Company.

The Krzywicki Consulting Agreement commences on November 13, 2023 and may be terminated by either the Company or Mr.

Krzywicki upon providing fifteen (15) days advance written notice.

On June 27, 2024, we entered into a master services agreement with Deel, Inc.

(together with its affiliates, the “Deel Group”), pursuant to which Deel Group provides consulting services to the Company.

On March 12, 2025, Deel Group and Mr.

Krzywicki entered into an employment agreement (the “Krzywicki Employment Agreement”), which supersedes and replaces the Krzywicki Consulting Agreement.

Under the Krzywicki Employment Agreement, Mr.

Krzywicki is entitled to an annual salary of approximately $122,100 and internal allowances incurred in connection with Mr.

Krzywicki’s service.

The Krzywicki Employment Agreement commenced on March 15, 2025.

The Krzywicki Consulting Agreement also contains certain standard confidentiality and assignment of inventions provisions.

Greg Lipschitz, Chief Executive Officer

On March 27, 2025, we entered into an executive employment agreement with Greg Lipschitz (the “Lipschitz Employment Agreement”), pursuant to which Mr.

Lipschitz acted as the Chief Executive Officer of the Company.

Under the Lipschitz Employment Agreement, Mr.

Lipschitz is entitled to a base salary of $300,000 per year and eligible to receive an annual cash bonus equal to fifty percent (50%) of the annual base salary as of December 31 of the applicable fiscal year and performance bonus.

Lipschitz is also entitled to an award of restricted stock units under the 2024 Plan that represents, in the aggregate, three percent (3.0%) of our issued and outstanding Common Stock, determined on a fully diluted basis, as of the date of the Lipschitz Employment Agreement, which one and one-half percent (1.5%) of such award shall vest monthly in thirty-six (36) equal monthly installments, subject to satisfaction of Mr.

Lipschitz’s continuous service;

and the remaining one and one-half percent (1.5%) of such award shall vest at a rate of zero point five percent (0.5%) per year over three years, contingent upon the achievement of annual performance targets which these annual performance targets will be mutually reviewed and determined by both parties and approved by the Board or the Compensation Committee at the beginning of each calendar year.

The initial term of the Lipschitz Employment Agreement is three years commencing on January 6, 2025 unless terminated earlier by either party in accordance with the terms of the Lipschitz Employment Agreement and will be renewed automatically for an additional one year if neither party provides a notice of termination within thirty (30) days prior to the expiration of the application term.

If the Company terminates Mr.

Lipschitz without cause, Mr.

Lipschitz will be entitled to the following severance payments:

(i) cash in the amount of annual base salary in effect on the date of such termination plus any annual cash bonus payable in 12 monthly installments;

and (ii) all outstanding equity compensation granted to Mr.

Lipschitz which are deemed to vest over the following 12 months from the date of termination shall vest immediately.

If the Company terminates Mr.

Lipschitz upon a Change of Control (as defined in the Lipschitz Employment Agreement), Mr.

Lipschitz will be entitled to severance payments:

(i) in cash in the amount of the annual base salary in effect on the date of such termination payable in one single lump sum plus any annual cash bonus Mr.

Lipschitz is entitled to;

and (ii) all outstanding equity compensation granted to Mr.

Lipschitz shall vest immediately.

The payment of severance may be conditioned on receiving a release of any and all claims that Mr.

Lipschitz may have against the Company.

Lipschitz was required to sign an Employee Confidential Information and Inventions Assignment Agreement, dated as of March 27, 2025, which prohibits unauthorized use or disclosure of the Company’s proprietary information, contains a general assignment of rights to inventions and intellectual property rights, non-competition provisions that apply during the term of employment, non-solicitation provisions that apply during the term of employment and for one year after the term of employment, and non-disparagement provisions that apply during and after the term of employment.

Stephen Purcell, Former Chief Financial Officer

On May 13, 2021, we entered into a consulting agreement with ElMindA Ltd.

(the “Purcell Agreement”), pursuant to which we retained Stephen Purcell as our Project Coordinator, and on November 23, 2021, Mr.

Purcell was appointed as our Chief Financial Officer.

The term of the Purcell Agreement commenced on May 17, 2021, and could be terminated by either us or Mr.

Purcell with requisite notice pursuant to the terms and conditions of the Purcell Agreement.

Pursuant to the Purcell Agreement, Mr.

Purcell was entitled to a fee of $12,500 per month.

The Purcell Agreement also contained certain non-solicitation, non-competition and confidentiality provisions customary for agreements of such nature.

On March 7, 2024, Mr.

Purcell resigned as our Chief Financial Officer upon the appointment of Paul Krzywicki as our Chief Financial Officer.

Additional Equity Compensation to Executive Officers

Equity Compensation

We have offered stock options to our named executive officers (in addition to certain non-executive employees) as the long-term incentive component of our compensation program.

Our stock options are subject to the terms and conditions of our 2007 Incentive Plan and allow employees to purchase shares of our Common Stock at a price per share not less than the fair market value of a share of our Common Stock on the date of grant.

Other terms of such stock options, such as vesting schedules, exercise periods and forfeiture upon termination of the participant’s employment with us, are subject to the discretion of the Board and as set forth in the individual award agreements evidencing the grant of such options.

On November 17, 2022, Mr.

Olsen was granted options to purchase 11,677 shares of our Common Stock, at an exercise price of $28.85.

All such options vest monthly.

The options have a term of ten years and expire on November 17, 2032.

8,379 of such options are currently exercisable.

On July 8, 2023, Mr.

Olsen was granted options to purchase 75,417 shares of our Common Stock, at an exercise price described in footnote (5) above.

All such options vest monthly.

The options had an original term of five years from the date of grant, subject to earlier termination in the case of Mr.

Olsen’s termination of employment with us, death, disability, retirement or termination for cause.

47,241 of such options are currently exercisable.

On July 8, 2023, Mr.

Olsen was granted restricted share units valued at $200,000.

These shares vested once the Company listed on a recognized North American Stock Exchange where the opening price is used to calculate the quantity.

On November 17, 2022, Mr.

Issachar was granted options to purchase 2,919 shares our Common Stock, at an exercise price of $28,85.

All such options vest monthly.

The options have a term of ten years and expire on November 17, 2032.

2,095 of such options are currently exercisable.

On July 8, 2023, Mr.

Issachar was granted options to purchase 75,417 shares of our Common Stock, at an exercise price of described in footnote (7) above.

All such options vest monthly.

The options had an original term of five years from the date of grant, subject to earlier termination in the case of Mr.

Issachar's termination of employment with us, death, disability, retirement or termination for cause.

47,241 of such options are currently exercisable.

On July 8, 2023, Mr.

Issachar was granted restricted share units valued at $200,000.

These shares vested once the Company listed on a recognized North American Stock Exchange where the opening price is used to calculate the quantity.

On November 17, 2022, Mr.

Purcell was granted options to purchase 5,839 shares our Common Stock, at an exercise price of $28.85.

All such options vest monthly.

The options have a term of ten years and expire on November 17, 2032.

0 of such options are currently exercisable.

On July 8, 2023, Mr.

Purcell was granted options to purchase 11,037 shares of our Common Stock, at an exercise price of described in footnote (6) above.

All such options vest monthly.

The options had an original term of five years from the date of grant, subject to earlier termination in the case of Mr.

Purcell’s termination of employment with us, death, disability, retirement or termination for cause.

0 of such options are currently exercisable.

On June 10, 2024, Mr.

Kaba was granted options to purchase 8,320 shares of our Common Stock, at an exercise price of described in footnote (5) above.

All such options vest monthly.

The options had an original term of five years from the date of grant, subject to earlier termination in the case of Mr.

Kaba’s termination of employment with us, death, disability, retirement or termination for cause.

1,572 of such options are currently exercisable

On March 1, 2024, Mr.

Krzywicki was granted options to purchase 11,024 shares of our Common Stock, at an exercise price of described in footnote (5) above.

All such options vest monthly.

The options had an original term of five years from the date of grant, subject to earlier termination in the case of Mr.

Krzywicki’s termination of employment with us, death, disability, retirement or termination for cause.

3,113 of such options are currently exercisable

Other Elements of Compensation

Pursuant to the terms of their respective employment agreements or arrangements, we provide and cover the costs of disability insurance policies and provide contributions to a pension fund for each of Mr.

Olsen and Mr.

For the years ended December 31, 2023, there were no health insurance expenses for Mr.

Health Insurance was offered as of February 2024.

Potential Payments Upon Termination of Employment or Change in Control

Upon consummation of the Merger, each outstanding option to acquire shares of Private Firefly’s Common Stock held by executive officers was converted into an option to acquire shares of Firefly’s Common Stock, post-Merger.

In addition, our executive officers also have certain rights to indemnification or to directors’ and officers’ liability insurance that survived the completion of the Merger.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning the outstanding equity awards that have been previously awarded to each of Firefly’s named executive officers and which remain outstanding as of December 31, 2024.

Firefly does not have any equity incentive plans other than the Firefly 2007 Incentive Plan and the Firefly 2023 Incentive Plan.

As of the date hereof, there are no share-based award plans for any of Firefly’s named executive officers or directors.

All options vest monthly, beginning as of their respective grant dates and reflect adjustment for the Exchange Ratio.

Named Executive

unexercisable

exercise price

Jon Olsen (former Chief Executive Officer)(1)

Stephen Purcell (former Chief Financial Officer)

Samer Kaba (former Chief Medical Officer)

Paul Krzywicki (Chief Financial Officer)

Olsen was removed from his position as the Company’s Chief Executive Officer by the Board without cause on January 6, 2025.

Additional Narrative to Named Executive Officer Compensation

Retirement Benefits

We have not maintained, and do not currently maintain, a defined benefit pension plan, nonqualified deferred compensation plan or other retirement benefits other than plans that do not discriminate in scope, terms or operation, in favor of executive officers of the registrant and that are available generally to all salaried employees.

Potential Payments Upon Termination or Change in Control

None of our named executive officers was entitled to severance compensation during the fiscal year ended December 31, 2024, except as described in “— Management Employment and Consulting Agreements ”.

Additional Narrative to Director Compensation

The following table sets forth summary information concerning the total compensation earned for each non-employee member of the Board during the years ended December 31, 2024 and 2023, and is contemplated to continue serving as a director.

All compensation paid to Mr.

Olsen is reported above under the heading “Summary Compensation Table,” above.

David DeCaprio(2)

Greg Lipschitz

Arun Menawat(3)

Brian Posner(4)

Stella Vnook(5)

Firefly provides information regarding the assumptions used to calculate the value of all option awards made to its executive officers in the section entitled “Firefly’s Management’s Discussion and Analysis and Results of Operations” contained elsewhere in this filing.

DeCaprio has served as a director of the Board since January 2024 and received no compensation in the reported period in his capacity as a director.

Menawat has served as a director of the Board since August 12, 2024, and received no compensation in the reported period in his capacity as a director.

Posner has served as a director of the Board since August 12, 2024, and received no compensation in the reported period in his capacity as a director.

DeCaprio has served as a director of the Board since January 2024 and received no compensation in the reported period in his capacity as a director.

Menawat has served as a director of the Board since August 12, 2024, and received no compensation in the reported period in his capacity as a director.

Vnook has served as a director of the Board since January 2024 and received no compensation in the reported period in her capacity as a director.

Consists of a grant of options to purchase 55,183 shares of Firefly Common Stock made to 2686255 Ontario Inc., an entity controlled by Mr.

Lipschitz, on July 8, 2023, of which 27,694 are currently exercisable.

Consists of a grant of options to purchase 7,358 shares of Firefly Common Stock made to Mr.

Reeves on July 8, 2023, of which 3,693 are currently exercisable.

In August 2024, immediately prior to the consummation of the Merger, Mr.

Reeves resigned as a member of the Board and all committees thereto.

Narrative Disclosure to Director Compensation Table

During the periods covered by the table above, our non-employee directors received no monetary compensation for their service as directors during such periods.

The directors’ compensation in the form of option awards is reported above.

Firefly 2007 Incentive Plan

Firefly adopted the Firefly 2007 Share Option Plan (the “Firefly 2007 Incentive Plan”) in 2007 for the purpose of granting stock options to employees, service providers, and consultants under Israeli law.

The Firefly 2007 Incentive Plan provides for grants to be issued at the determination of the Board and/or any committee of the Board so appointed by the Board in accordance with applicable laws.

At the effective time of the merger, WaveDancer will assume all of Firefly’s rights and obligations under all stock options granted under the Firefly 2007 Incentive Plan that are outstanding immediately prior to the effective time of the merger.

In addition, the Firefly 2007 Incentive Plan will be assumed by WaveDancer at the effective time of the merger, provided that no additional awards may be issued thereunder.

Authorized Shares .

A total of 300,000 shares of Firefly Common Stock have been authorized for the grant of awards under the Firefly 2007 Incentive Plan.

Plan Administration .

The Firefly 2007 Incentive Plan is administered by the Board, either directly or upon the recommendation of any committee of the Board so appointed by the Board (the “Committee”).

Except as otherwise provided in the Firefly 2007 Incentive Plan, the Committee shall have the power to recommend to the Board, and the Board has full power and authority, to designate optionees, determine the terms and provisions of stock option agreements, determine the fair market value of the shares of Common Stock covered by each stock option, classify whether an award shall be granted pursuant to Section 102 (as defined below) or Section 3(i) (as defined below), designate grants made pursuant to Section 102 as either grants made through a trustee or not through a trustee, alter any restrictions and conditions of any awards, and make all other determinations deemed necessary or advisable for the administration of the Firefly 2007 Incentive Plan.

Stock Options.

The Firefly 2007 Incentive Plan provides for the grant of stock options pursuant and subject to (i) Section 102 of the Israeli Income Tax Ordinance (New Version), 1961 (the “Income Tax Ordinance”) or any provision which may amend or replace it and any regulations, rules, orders or procedures promulgated thereunder (collectively, “Section 102”) and to classify them as (x) either grants made through a trustee or not through a trustee;

and (y) grants qualified under capital gain or ordinary income tax treatment;

and (ii) Section 3(i) of the Income Tax Ordinance (“Section 3(i)”).

In connection with a grant of stock options, grantees receive the right to purchase a specified number of shares of Common Stock at a specified option exercise price, vesting schedule, and other terms and conditions as are specified by the Board and included in the applicable award agreement.

The purchase price of each share of Common Stock shall be determined by the Committee in its sole and absolute discretion in accordance with applicable law, subject to any guidelines as may be determined by the Board from time to time.

Options may be exercised by the optionee by giving written notice to Firefly and/or to any third party designated by Firefly, in such form and method as may be determined by Firefly and when applicable, by the trustee in accordance with the requirements of Section 102, which exercise shall be effective upon receipt of such notice and the payment of the purchase price.

Such notice shall specify the number of shares of Common Stock with respect to which the option is being exercised.

Options may be exercised by the optionee in whole at any time or in part from time to time, to the extent that the options become vested and exercisable, prior to their expiration date, and provided that the optionee is employed by or providing services to Firefly or any of its affiliates during the period beginning with grant date and ending upon the date of exercise.

Options, to the extent not previously exercised, shall terminate upon the earlier of:

(i) the date set forth in the option agreement;

(ii) ninety days after a termination without cause;

(iii) six months following a termination as a result of death or disability;

or (iv) if further extended by the Committee prior to date of termination.

With respect to all shares of Common Stock allocated or issued upon the exercise of options purchased by the optionee and held by the optionee or by the trustee, as the case may be, the optionee shall be entitled to receive dividends in accordance with the quantity of such shares of Common Stock, subject to Firefly’s Articles of Association (and all amendments thereto) and any applicable taxation on distribution of dividends and, when applicable, subject to the provisions of Section 102 and the rules, regulations or orders promulgated thereunder.

Certain Adjustments;

Corporate Transaction Events.

In the event of a merger, acquisition or reorganization of Firefly with one or more other entities in which Firefly is not the surviving entity or a sale of all or substantially all of the assets of Firefly, the Board or the Committee may resolve that the unexercised options then outstanding under the Firefly 2007 Incentive Plan shall be assumed or substituted for an appropriate number of shares or other securities of the successor company (or a parent or subsidiary of the successor company) as were distributed to the shareholders of Firefly in connection and with respect to such a transaction.

In the case of such assumption and/or substitution of options, appropriate adjustments shall be made to the purchase price so as to reflect such action and all other terms and conditions of the option agreements shall remain unchanged, including, but not limited to, the vesting schedule, subject to the determination of the Committee or the Board, which determination shall be in their sole and absolute discretion.

Amendment, Termination .

The Board may at any time, but when applicable, after consultation with the trustee, amend, alter, suspend or terminate the Firefly 2007 Incentive Plan.

No amendment, alteration, suspension, or termination of the Firefly 2007 Incentive Plan shall impair the rights of any optionee, unless mutually agreed otherwise between the optionee and Firefly, which agreement must be in writing and signed by the optionee and Firefly.

Termination of the Firefly 2007 Incentive Plan shall not affect the Committee’s ability to exercise the powers granted to it under the Firefly 2007 Incentive Plan prior to the date of such termination.

Firefly 2023 Incentive Plan

Firefly adopted the Firefly 2023 Omnibus Equity Incentive Plan (the “Firefly 2023 Incentive Plan”) on July 8, 2023.

The Firefly 2023 Incentive Plan was adopted to advance the interest of Firefly’s stockholders by enhancing Firefly’s ability to attract, retain, and motivate persons who are expected to make important contributions to Firefly by (i) providing Firefly with a mechanism to attract, retain and motivate highly qualified directors, officers, employees and consultants, (ii) aligning the interests of such persons with those of Firefly’s stockholders, and (iii) enabling and encouraging such persons to participate in the long-term growth of Firefly.

The Firefly 2023 Incentive Plan authorizes the grant of stock options, share appreciation rights, deferred share units, restricted share units, and performance share units, or a combination of the foregoing.

At the effective time of the merger, we assumed all of Firefly’s rights and obligations under all stock options granted under the Firefly 2023 Incentive Plan that are outstanding immediately prior to the effective time of the merger.

In addition, the Firefly 2023 Incentive Plan will be assumed by WaveDancer at the effective time of the merger, provided that no additional awards may be issued thereunder.

Authorized Shares .

A total of 4,440,355 shares of Common Stock have been authorized for the grant of awards under the Firefly 2023 Incentive Plan.

Plan Administration .

The Firefly 2023 Incentive Plan is administered by the Firefly board of directors or if so delegated in whole or in part by the Firefly board of directors, the Compensation Committee of the Firefly board of directors, or any other duly authorized committee of the board of directors appointed by the board of directors to administer the Firefly 2023 Incentive Plan (the “Committee”).

The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of the Firefly 2023 Incentive Plan and any award agreement or other agreement ancillary to or in connection with the Firefly 2023 Incentive Plan, to determine eligibility for awards, and to adopt such rules, regulations and guidelines for administering the Firefly 2023 Incentive Plan as the Committee may deem necessary or proper.

Such authority shall include, but not be limited to, selecting award recipients, establishing all award terms and conditions, including grant, exercise price, issue price and vesting terms, whether awards payout in cash or shares where applicable, determining any performance goals applicable to awards and whether such performance goals have been achieved and adopting modifications and amendments to the Firefly 2023 Incentive Plan or any award agreement, including, without limitation, any that are necessary or appropriate to comply with the laws or compensation practices of the jurisdictions in which Firefly and its affiliates operate.

Stock Options.

Options granted under the Firefly 2023 Incentive Plan may be granted to participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee in its discretion.

Each stock option grant shall be evidenced by an award agreement that shall specify the option price, the duration of the option, the number of shares to which the option pertains, the conditions, if any, upon which an option shall become vested and exercisable, and any such other provisions as the Committee shall determine.

Options may not have an exercise price per share of less than 100% of the fair market value of a share on the date of grant.

Subject to any provisions of the Firefly 2023 Incentive Plan or the applicable award agreement relating to acceleration of vesting of options, regulatory requirements and the policies of the designated stock exchange or trading platform, the Committee shall determine the vesting provisions of each grant of options at the time.

Notwithstanding the foregoing, options granted to any consultant or persons retained to provide investor relations activities shall vest in stages over a period of not less than twelve months with no more than one-quarter of the options vesting in any three-month period.

Each option shall expire at such time as the Committee shall determine at the time of grant, provided, however, that, subject to any blackout periods, no option shall be exercisable later than the seventh anniversary date of its grant.

The treatment of options under the Firefly 2023 Incentive Plan upon a participant’s termination of employment with or service to Firefly is set forth in the applicable award agreement or the Firefly 2023 Incentive Plan, but in no event can options terminate more than one year following the participant’s termination.

Share Appreciation Rights ( “SARS” ).

Subject to any provisions of the Firefly 2023 Incentive Plan or an applicable award agreement, SARs may be granted to participants at any time and from time to time and upon such terms as shall be determined by the Committee in its discretion.

Each SAR award shall be evidenced by an award agreement that shall specify the grant price, the term, and any such other provisions as the Committee shall determine.

No SAR shall be exercisable later than the tenth anniversary date of its grant.

Upon the exercise of a SAR, a participant shall be entitled to receive payment from Firefly in an amount representing the difference between the of the underlying shares on the date of exercise over the grant price.

At the discretion of the Committee, the payment upon the exercise of a SAR may be in cash, shares of equivalent value (based on the fair market value of the shares on the date of exercise of the SAR, as defined in the award agreement or otherwise defined by the Committee thereafter), in some combination thereof, or in any other form approved by the Committee at its sole discretion.

The treatment of SARs under the Firefly 2023 Incentive Plan upon a participant’s termination of employment with or service to Firefly is set forth in the applicable award agreement or the Firefly 2023 Incentive Plan, but in no event can SARs terminate more than one year following the participant’s termination.

Deferred Share Units.

Subject to any provisions of the Firefly 2023 Incentive Plan or an applicable award agreement, the Committee, at any time and from time to time, may grant Deferred Share Units to participants in such amounts and upon such terms as the Committee shall determine.

Each Deferred Share Unit grant shall be evidenced by an award agreement that shall specify the number of Deferred Share Units granted, the settlement date for Deferred Share Units, and any other provisions as the Committee shall determine, including, but not limited to, a requirement that participants pay a stipulated purchase price for each Deferred Share Unit, restrictions based upon the achievement of specific performance criteria, time-based restrictions, restrictions under applicable laws or other requirements, or holding requirements or sale restrictions placed on the shares upon vesting of such Deferred Share Units.

The treatment of Deferred Share Units under the Firefly 2023 Incentive Plan upon a participant’s termination of employment with or service to Firefly is set forth in the applicable award agreement or the Firefly 2023 Incentive Plan, but in no event can Deferred Share Units terminate more than one year following the participant’s termination.

Restricted Share Units.

Subject to any provisions of the Firefly 2023 Incentive Plan or an applicable award agreement, the Committee, at any time and from time to time, may grant Restricted Share Units to participants in such amounts and upon such terms as the Committee shall determine.

Each Restricted Share Unit grant shall be evidenced by an award agreement that shall specify the period of any restrictions, the number of Restricted Share Units granted, the settlement date for Restricted Share Units, whether such Restricted Share Unit is settled in cash, shares or a combination thereof or if the form of payment is reserved for later determination by the Committee, and any such other provisions as the Committee shall determine, provided that unless otherwise determined by the Committee or as set out in any award agreement.

The Committee shall impose, in the award agreement at the time of grant, such other conditions and/or restrictions on any Restricted Share Units granted pursuant to the Firefly 2023 Incentive Plan as it may deem advisable, including, without limitation, restrictions based upon the achievement of specific performance criteria, time-based restrictions on vesting following the attainment of the performance criteria, time-based restrictions, restrictions under applicable laws or other requirements.

Performance Share Units.

Subject to any provisions of the Firefly 2023 Incentive Plan or an applicable award agreement, the Committee, at any time and from time to time, may grant Performance Share Units to participants in such amounts and upon such terms as the Committee shall determine.

Each Performance Share Unit shall have an initial value equal to the fair market value of a share on the date of grant.

The Committee shall set performance criteria for a performance period in its discretion, which, depending on the extent to which they are met, will determine, in the manner determined by the Committee and set forth in the award agreement, the value and/or number of each Performance Share Unit that will be paid to the participant.

Subject to the terms of the Firefly 2023 Incentive Plan and the applicable award agreement, after the applicable performance period has ended, the holder of Performance Share Units shall be entitled to receive payout on the value and number of Performance Share Units, determined as a function of the extent to which the corresponding performance criteria have been achieved.

Notwithstanding the foregoing, Firefly shall have the ability to require the participant to hold any shares received pursuant to such award for a specified period of time.

Payment of earned Performance Share Units shall be as determined by the Committee and as set forth in the award agreement.

Subject to the terms of the Firefly 2023 Incentive Plan, the Committee, in its sole discretion, may pay earned Performance Share Units in the form of:

(i) cash equal to the value of the earned Performance Share Units at the end of the applicable performance period, (ii) a number of shares issued from treasury equal to the number of earned Performance Share Units at the end of the applicable performance period, or (iii) in a combination thereof in the discretion of Firefly.

Any shares may be granted subject to any restrictions deemed appropriate by the Committee.

The determination of the Committee with respect to the form of payout of such awards shall be set forth in the award agreement for the grant of the award or reserved for later determination.

The treatment of Performance Share Units under the Firefly 2023 Incentive Plan upon a participant’s termination of employment with or service to Firefly is set forth in the applicable award agreement or the Firefly 2023 Incentive Plan, but in no event can Performance Share Units terminate more than one year following the participant’s termination.

Certain Adjustments;

Corporate Reorganization Events.

In the event of any corporate event or transaction (collectively, a “Corporate Reorganization”) (including, but not limited to, a change in the shares or the capitalization of Firefly) such as a merger, arrangement, amalgamation, consolidation, reorganization, recapitalization, separation, stock dividend, extraordinary dividend, stock split, reverse stock split, split up, spin-off or other distribution of stock or property of Firefly, combination of securities, exchange of securities, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to stockholders of Firefly, or any similar corporate event or transaction, the Committee shall make or provide for such adjustments or substitutions, as applicable, in the number and kind of shares that may be issued under the Firefly 2023 Incentive Plan, the number and kind of shares subject to outstanding awards, the option price or grant price applicable to outstanding awards, the limit on issuing awards other than options granted with an option price equal to at least the fair market value of a share on the date of grant or SARs with a grant price equal to at least the fair market value of a share on the date of grant, and any other value determinations applicable to outstanding awards or to the Firefly 2023 Incentive Plan, as are equitably necessary to prevent dilution or enlargement of participants’ rights under the Firefly 2023 Incentive Plan that otherwise would result from such corporate event or transaction.

In connection with a Corporate Reorganization, the Committee shall have the discretion to permit a holder of options to purchase (at the times, for the consideration, and subject to the terms and conditions set out in the Firefly 2023 Incentive Plan and the applicable award agreement) and the holder will then accept on the exercise of such option, in lieu of the shares that such holder would otherwise have been entitled to purchase, the kind and amount of shares or other securities or property that such holder would have been entitled to receive as a result of the Corporate Reorganization if, on the effective date thereof, that holder had owned all shares that were subject to the option.

Such adjustments shall be made automatically, without the necessity of Committee action, on the customary arithmetical basis in the case of any stock split, including a stock split effected by means of a stock dividend, and in the case of any other dividend paid in shares.

The Committee shall also make appropriate adjustments in the terms of any awards under the Firefly 2023 Incentive Plan as are equitably necessary to reflect such Corporate Reorganization and may modify any other terms of outstanding awards, including modifications of performance criteria and changes in the length of performance periods.

The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on participants under the Firefly 2023 Incentive Plan, provided that any such adjustments must comply with Section 409A of the Code with respect to any U.S.

participants.

Subject to the Firefly 2023 Incentive Plan and any applicable law or regulatory requirement, without affecting the number of shares reserved or available hereunder, the Committee may authorize the issuance, assumption, substitution or conversion of awards under the Firefly 2023 Incentive Plan in connection with any Corporate Reorganization, upon such terms and conditions as it may deem appropriate.

Additionally, the Committee may amend the Plan, or adopt supplements to the Firefly 2023 Incentive Plan, in such manner as it deems appropriate to provide for such issuance, assumption, substitution or conversion as provided in the previous sentence.

Amendment, Termination .

The Firefly board at any time, and from time to time, may amend or suspend any provision of an award or the Firefly 2023 Incentive Plan, or terminate the Firefly 2023 Incentive Plan, subject to those provisions that require the approval of security holders or any governmental or regulatory body regardless of whether any such amendment or suspension is material, fundamental or otherwise, and notwithstanding any rule of common law or equity to the contrary.

Firefly Neuroscience, Inc.

2024 Long-Term Incentive Plan

Prior to the consummation of the Merger, at a special meeting of WaveDancer ’ s stockholders on March 14, 2024, the stockholders of WaveDancer considered and approved the WaveDancer 2024 Long-Term Incentive Plan (the “ WaveDancer Incentive Plan ” ).

The WaveDancer Incentive Plan was previously approved and adopted, subject to stockholder approval, by the WaveDancer Board on February 1, 2024.

On the Closing Date and following the consummation of the Merger, the Board approved the adoption of the WaveDancer Incentive Plan and to change the name of the WaveDancer Incentive Plan to the Firefly Neuroscience, Inc.

2024 Long-Term Incentive Plan (the “ 2024 Plan ” ).

The purpose of the 2024 Plan is to enable us to remain competitive and innovative in our ability to attract and retain the services of our key employees, key contractors, and non-employee directors of Firefly or any of our subsidiaries.

The 2024 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other awards, which may be granted singly, in combination, or in tandem, and which may be paid in cash or shares of our Common Stock.

The 2024 Plan is expected to provide flexibility to our compensation methods in order to adapt the compensation of our key employees, key contractors, and non-employee directors to a changing business environment, after giving due consideration to competitive conditions and the impact of applicable tax laws.

Effective Date and Expiration .

The 2024 Plan was approved by our board of directors on February 1, 2024, subject to the 2024 Plan’s approval by our stockholders, and will become effective on the date of such approval (the “Effective Date”).

The 2024 Plan will terminate on the tenth anniversary of the Effective Date, unless sooner terminated by our board of directors.

No awards may be made under the 2024 Plan after its termination date, but awards made prior to the termination date may extend beyond that date in accordance with their terms.

Share Authorization .

Subject to certain adjustments, the number of shares of our Common Stock that are reserved for issuance pursuant to awards under the 2024 Plan is eight hundred thirty-three thousand three hundred thirty-three (833,333) shares, 100% of which may be delivered as incentive stock options.

Shares to be issued may be made available from authorized but unissued shares of our Common Stock, shares held by us in our treasury, or shares purchased by us on the open market or otherwise.

During the term of the 2024 Plan, we will at all times reserve and keep enough shares available to satisfy the requirements of the 2024 Plan.

If an award under the 2024 Plan is cancelled, forfeited, or expires, in whole or in part, the shares subject to such forfeited, expired, or cancelled award may again be awarded under the 2024 Plan.

Awards that may be satisfied either by the issuance of Common Stock or by cash or other consideration shall be counted against the maximum number of shares that may be issued under the 2024 Plan only during the period that the award is outstanding or to the extent the award is ultimately satisfied by the issuance of shares.

An award will not reduce the number of shares that may be issued pursuant to the 2024 Plan if the settlement of the award will not require the issuance of shares, as, for example, a stock appreciation right that can be satisfied only by the payment of cash.

Shares of Common Stock that are otherwise deliverable pursuant to an award under the 2024 Plan that are withheld in payment of the option price of an option or for payment of applicable employment taxes and/or withholding obligations resulting from the award shall be treated as delivered to the award recipient and shall be counted against the maximum number of shares of our Common Stock that may be issued under the 2024 Plan.

Only shares forfeited back to us or cancelled on account of termination, expiration, or lapse of an award shall again be available for grant of incentive stock options under the 2024 Plan but shall not increase the maximum number of shares described above as the maximum number of shares of our Common Stock that may be delivered pursuant to incentive stock options.

Administration .

Subject to the terms of the 2024 Plan, the 2024 Plan shall be administered by the Board or such committee of the Board of Directors as is designated by the Board of Directors to administer the Plan (the “Committee”).

Membership on the Committee shall be limited to “non-employee directors” in accordance with Rule 16b-3 under the Securities Exchange Act of 1934, as amended.

The Committee may delegate certain duties to one or more officers as provided in the 2024 Plan.

The Committee will determine the persons to whom awards are to be made, determine the type, size and terms of awards, interpret the 2024 Plan, establish and revise rules and regulations relating to the 2024 Plan and make any other determinations that it believes necessary for the administration of the 2024 Plan.

Eligibility .

Employees (including any employee who is also a director or an officer), contractors, and non-employee directors of Firefly or any of our subsidiaries, whose judgment, initiative, and efforts contributed to or may be expected to contribute to our successful performance, are eligible to participate in the 2024 Plan.

As of the date of this filing, we have thirteen full time employees and one contractors who would be eligible for awards under the 2024 Plan.

Stock Options .

The Committee may grant either incentive stock options (“ISOs”) qualifying under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options, provided that only employees of Firefly and our subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs.

Stock options may not be granted with an option price less than 100% of the fair market value of a share of Common Stock on the date the stock option is granted.

If an ISO is granted to an employee who owns or is deemed to own more than 10% of the combined voting power of all classes of our stock (or of any parent or subsidiary), the option price shall be at least 110% of the fair market value of a share of Common Stock on the date of grant.

The Committee will determine the terms of each stock option at the time of grant, including, without limitation, the methods by or forms in which shares will be delivered to participants or registered in their names.

The maximum term of each option, the times at which each option will be exercisable, and provisions requiring forfeiture of unexercised options at or following termination of employment or service generally are fixed by the Committee, except that the Committee may not grant stock options with a term exceeding 10 years or, in the case of an ISO granted to an employee who owns or is deemed to own more than 10% of the combined voting power of all classes of our stock (or of any parent or subsidiary), a term exceeding five years.

Recipients of stock options may pay the option price (i) in cash, check, bank draft, or money order payable to the order of Firefly;

(ii) by delivering to us shares of our Common Stock (included restricted stock) already owned by the participant having a fair market value equal to the aggregate option price and that the participant has not acquired from us within six months prior to the exercise date;

(iii) by delivering to us or our designated agent an executed irrevocable option exercise form, together with irrevocable instructions from the participant to a broker or dealer, reasonably acceptable to us, to sell certain of the shares purchased upon the exercise of the option or to pledge such shares to the broker as collateral for a loan from the broker and to deliver to us the amount of sale or loan proceeds necessary to pay the purchase price;

(iv) by requesting us to withhold the number of shares otherwise deliverable upon exercise of the stock option by the number of shares having an aggregate fair market value equal to the aggregate option price at the time of exercise (i.e., a cashless net exercise);

and (v) by any other form of valid consideration that is acceptable to the Committee in its sole discretion.

No dividends or dividend equivalent rights may be paid or granted with respect to any stock options granted under the 2024 Plan.

Stock Appreciation Rights .

The Committee is authorized to grant stock appreciation rights (“SARs”) as a stand-alone award, or freestanding SARs, or in conjunction with options granted under the 2024 Plan, or tandem SARs.

SARs entitle a participant to receive an amount equal to the excess of the fair market value of a share of Common Stock on the date of exercise over the fair market value of a share of our Common Stock on the date of grant.

The exercise price of a SAR cannot be less than 100% of the fair market value of a share of our Common Stock on the date of grant.

The Committee will determine the terms of each SAR at the time of the grant, including, without limitation, the methods by or forms in which shares will be delivered to participants or registered in their names.

The maximum term of each SAR, the times at which each SAR will be exercisable, and provisions requiring forfeiture of unexercised SARs at or following termination of employment or service generally are fixed by the Committee, except that no freestanding SAR may have a term exceeding 10 years and no tandem SAR may have a term exceeding the term of the option granted in conjunction with the tandem SAR.

Distributions to the recipient may be made in Common Stock, cash, or a combination of both as determined by the Committee.

No dividends or dividend equivalent rights may be paid or granted with respect to any SARs granted under the 2024 Plan.

Restricted Stock and Restricted Stock Units .

The Committee is authorized to grant restricted stock and restricted stock units.

Restricted stock consists of shares of our Common Stock that may not be sold, assigned, transferred, pledged, hypothecated, encumbered, or otherwise disposed of, and that may be forfeited in the event of certain terminations of employment or service, prior to the end of a restricted period as specified by the Committee.

Restricted stock units are the right to receive shares of Common Stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the Committee, which include a substantial risk of forfeiture and restrictions on their sale or other transfer by the participant.

The Committee determines the eligible participants to whom, and the time or times at which, grants of restricted stock or restricted stock units will be made;

the number of shares or units to be granted;

the price to be paid, if any;

the time or times within which the shares covered by such grants will be subject to forfeiture;

the time or times at which the restrictions will terminate;

and all other terms and conditions of the grants.

Restrictions or conditions could include, but are not limited to, the attainment of performance goals (as described below), continuous service with us, the passage of time, or other restrictions and conditions.

Except as otherwise provided in the 2024 Plan or the applicable award agreement, a participant shall have, with respect to shares of restricted stock, all of the rights of a stockholder of Firefly holding the class of Common Stock that is the subject of the restricted stock, including, if applicable, the right to vote the Common Stock and the right to receive any dividends thereon.

Performance Awards .

The Committee may grant performance awards payable at the end of a specified performance period in cash, shares of Common Stock, units, or other rights based upon, payable in, or otherwise related to our Common Stock.

Payment will be contingent upon achieving pre-established performance goals (as discussed below) by the end of the applicable performance period.

The Committee will determine the length of the performance period, the maximum payment value of an award, and the minimum performance goals required before payment will be made, so long as such provisions are not inconsistent with the terms of the 2024 Plan and, to the extent an award is subject to Section 409A of the Code, are in compliance with the applicable requirements of Section 409A of the Code and any applicable regulations or guidance.

In certain circumstances, the Committee may, in its discretion, determine that the amount payable with respect to certain performance awards will be reduced from the maximum amount of any potential awards.

If the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in our business, operations, corporate structure, or for other reasons that the Committee deems satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.

Performance Goals .

Awards (whether relating to cash or Common Stock) under the 2024 Plan may be made subject to the attainment of performance goals relating to one or more business criteria, and may consist of one or more or any combination of the following criteria:

ratio of debt to debt plus equity;

net borrowing, credit quality or debt ratings;

profit before tax;

economic profit;

earnings before interest and taxes;

earnings before interest, taxes, depreciation and amortization;

gross margin;

earnings per share (whether on a pre-tax, after-tax, operational or other basis);

operating earnings;

capital expenditures;

expenses or expense levels;

economic value added;

ratio of operating earnings to capital spending or any other operating ratios;

free cash flow;

net asset value per share;

the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions;

sales growth;

price of our Common Stock;

return on assets, equity or stockholders’ equity;

market share;

inventory levels, inventory turn or shrinkage;

total return to stockholders;

or any other criteria determined by the Committee (“Performance Criteria”).

Any Performance Criteria may be used to measure the performance of Firefly as a whole or any business unit of Firefly and may be measured relative to a peer group or index.

Any Performance Criteria may include or exclude (i) events that are of an unusual nature or indicate infrequency of occurrence, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in our quarterly and annual earnings releases, or (v) other similar occurrences.

In all other respects, Performance Criteria shall be calculated in accordance with our financial statements, under generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an award which is consistently applied and identified in the audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of our annual report.

Other Awards .

The Committee may grant other forms of awards, based upon, payable in, or that otherwise relate to, in whole or in part, shares of our Common Stock, if the Committee determines that such other form of award is consistent with the purpose and restrictions of the 2024 Plan.

The terms and conditions of such other form of award shall be specified in the grant.

Such other awards may be granted for no cash consideration, for such minimum consideration as may be required by applicable law, or for such other consideration as may be specified in the grant.

Vesting of Awards, Forfeiture, Assignment .

The Committee, in its sole discretion, may determine that an award will be immediately vested, in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its date of grant, or until the occurrence of one or more specified events, subject in any case to the terms of the 2024 Plan.

If the Committee imposes conditions upon vesting, then, subsequent to the date of grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the award may be vested.

The Committee may impose on any award at the time of grant or thereafter, such additional terms and conditions as the Committee determines, including terms requiring forfeiture of awards in the event of a participant’s termination of employment or service.

The Committee will specify the circumstances on which performance awards may be forfeited in the event of a termination of service by a participant prior to the end of a performance period or settlement of awards.

Except as otherwise determined by the Committee, restricted stock will be forfeited upon a participant’s termination of employment or service during the applicable restriction period.

In addition, we may recoup all or any portion of any shares or cash paid to a participant in connection with any award in the event of a restatement of our financial statements as set forth in our Clawback Policy, if any, as such policy may be approved or modified by our board of directors from time to time.

Awards granted under the 2024 Plan generally are not assignable or transferable except by will or by the laws of descent and distribution, except that the Committee may, in its discretion and pursuant to the terms of an award agreement, permit transfers of awards to (i) the spouse (or former spouse), children, or grandchildren of the participant (“Immediate Family Members”);

(ii) a trust or trusts for the exclusive benefit of such Immediate Family Members;

(iii) a partnership in which the only partners are (a) such Immediate Family Members and/or (b) entities which are controlled by the participant and/or his or her Immediate Family Members;

(iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision;

or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the applicable award agreement pursuant to which such awards are granted must be approved by the Committee and must expressly provide for such transferability, and (z) subsequent transfers of awards shall be prohibited except those by will or the laws of descent and distribution.

Adjustments Upon Changes in Capitalization .

In the event that any dividend or other distribution (whether in the form of cash, shares of our Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of shares of Common Stock or other securities, issuance of warrants or other rights to purchase shares of Common Stock or other securities, or other similar corporate transaction or event affects the fair value of an award, then the Committee shall adjust any or all of the following so that the fair value of the award immediately after the transaction or event is equal to the fair value of the award immediately prior to the transaction or event:

(i) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of awards;

(ii) the number of shares and type of Common Stock (or other securities or property) subject to outstanding awards;

(iii) the option price of each outstanding stock option;

(iv) the amount, if any, we pay for forfeited shares in accordance with the terms of the 2024 Plan;

and (v) the number of or exercise price of shares then subject to outstanding SARs previously granted and unexercised under the 2024 Plan, to the end that the same proportion of our issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate exercise price;

provided, however, that the number of shares of Common Stock (or other securities or property) subject to any award shall always be a whole number.

Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would cause the 2024 Plan or any stock option to violate Section 422 of the Code or Section 409A of the Code.

All such adjustments must be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which we are subject.

Amendment or Discontinuance of the 2024 Plan .

Our board of directors may, at any time and from time to time, without the consent of participants, alter, amend, revise, suspend, or discontinue the 2024 Plan in whole or in part;

provided, however, that (i) no amendment that requires stockholder approval in order for the 2024 Plan and any awards under the 2024 Plan to continue to comply with Sections 421 and 422 of the Code (including any successors to such sections or other applicable law) or any applicable requirements of any securities exchange or inter-dealer quotation system on which our stock is listed or traded, shall be effective unless such amendment is approved by the requisite vote of our stockholders entitled to vote on the amendment;

and (ii) unless required by law, no action by our board of directors regarding amendment or discontinuance of the 2024 Plan may adversely affect any rights of any participants or obligations to any participants with respect to any outstanding awards under the 2024 Plan without the consent of the affected participant.

No Repricing of Stock Options or SARs .

The Committee may not “reprice” any stock option or SAR without stockholder approval.

For purposes of the 2024 Plan, “reprice” means any of the following or any other action that has the same effect:

(i) amending a stock option or SAR to reduce its exercise price or base price, (ii) canceling a stock option or SAR at a time when its exercise price or base price exceeds the fair market value of a share of Common Stock in exchange for cash or a stock option, SAR, award of restricted stock or other equity award, or (iii) taking any other action that is treated as a repricing under generally accepted accounting principles, provided that nothing shall prevent the Committee from (x) making adjustments to awards upon changes in capitalization;

(y) exchanging or cancelling awards upon a merger, consolidation, or recapitalization, or (z) substituting awards for awards granted by other entities, to the extent permitted by the 2024 Plan.

Recoupment for Restatements .

The Committee may recoup all or any portion of any shares or cash paid to a participant in connection with an award, in the event of a restatement of our financial statements as set forth in our Clawback Policy, if any, approved by the Board from time to time.

Clawback Policy

On August 12, 2024, our board of directors adopted a Clawback Policy in accordance with applicable Nasdaq rules (the “Clawback Policy”).

The Clawback Policy provides that we will recover reasonably promptly the amount of erroneously awarded incentive-based compensation to any current or former executive officers in the event that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.

A copy of the Clawback Policy is filed as Exhibit 97.1 to this Annual Report on Form 10-K.

Pursuant to Rule 10D-1(b) of the Exchange Act, Nasdaq Listing Rule 5608, and the Clawback Policy, the Company conducted a recovery analysis of incentive-based compensation received by its executive officers and that was subject to recovery, to ascertain whether any adjustments were required as a result of the error corrections to the Company’s financial results during the year that are described in Note B to the financial statements included in this Annual Report on Form 10-K.

The recovery analysis concluded that no adjustments to executive compensation were required because the error corrections did not impact any of the measures by which the Company compensated its executives with respect to the compensation received by its executive officers and subject to recovery.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Equity Compensation Plan Information

The following table contains information regarding securities authorized and available for issuance under our equity compensation plans for certain employees, directors, and consultants, as of December 31, 2023.

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 25, 2025 by (i) each of our named executive officers, current executive officers, and directors;

(ii) all of our executive officers and directors as a group;

and (iii) each person who is known by us to beneficially own more than 5% of our common stock.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

Under those rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power, and also any shares which the person has the right to acquire within 60 days of March 25, 2025, through the exercise or conversion of any stock option, convertible security, warrant or other right.

Except as set forth below, each of the beneficial owners listed below has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.

Unless otherwise specified, the address of each of the persons named in this table is c/o Firefly Neuroscience, Inc., 1100 Military Road, Kenmore, NY 14217.

Name of Beneficial Owner

Five Percent Holders

Windsor Private Capital LP(1)

Canaccord Genuity Corp (2)

Directors and Named Executive Officers

David DeCaprio(3)

Gil Issachar(4)

Greg Lipschitz(5)

Arun Menawat(6)

Paul Krzywicki(7)

All Directors and Executive Officers of the Company as a Group (7 persons)

Represents beneficial ownership of less than 1%.

Consists of 1,705,751 shares of Common Stock pursuant to the Schedule 13D filed jointly by WPC Management Services, Inc.

WPC GP I Inc., Windsor Private Capital LP (“Windsor”), Jordan Kupinsky, HJRK Holdings, Inc., Rocco Marcello, and John Cundari on August 21, 2024.

Jordan Kupinsky, Rocco Marcello and John Cundari jointly exercise voting and dispositive power over the shares held by Windsor Capital Private LP.

As such, Messrs.

Kupinsky, Marcello and Cundari may be deemed to be the beneficial owner of all shares of Common Stock held by Windsor.

Consists of 292,770 shares of Common Stocks, 292,770 warrants with a strike price of $4.00 and 20,833 warrants with an exercise price of $3.00.

Consists of shares underlying options to purchase up to 5,850 shares of Common Stock that are currently exercisable or exercisable within 60 days of March 25, 2025.

Consist of (1) 33,480 shares of Common Stock held by Mr.

Issachar and (2) underlying options to purchase up to 58,940 shares of Common Stock that are currently exercisable or exercisable within 60 days of March 25, 2025

Consists of (1) 404,707 shares of Common Stock and (2) up to 1,735 shares of Common Stock that are currently exercisable or exercisable within 60 days of March 25, 2025, underlying certain warrants, and (3) up to 36,837 shares of Common Stock that are currently exercisable or exercisable within 60 days of March 25, 2025, underlying certain stock options held by Bower Four Capital Corp., an entity in which Mr.

Lipschitz is the sole stockholder.

Consists of (1) 99,405 shares of Common Stock and (2) up to 2,602 shares of Common Stock that are currently exercisable or exercisable within 60 days of March 25, 2025, underlying certain warrants, and (3) up to 45,715 shares of Common Stock that are currently exercisable or exercisable within 60 days of March 25, 2025, underlying certain stock options held by Mr.

Consists of 4,593 shares of common stock that are currently exercisable or exercisable within 60 days of March 25, 2025, underlying certain stock options.

Changes in Control

We do not have any arrangements known to us the operation of which may at a subsequent date result in a change in control of the Company.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth certain information about the securities authorized for issuance under compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance as of December 31, 2024.

Plan Category

securities to be

options, warrants,

Weighted average

exercise price of

options, warrants,

available for

future issuance

exercise of outstanding

exercise price

of outstanding

Number of securities

remaining available

for future issuance

compensation plans

(excluding securities

reflected in column

Equity compensation plans approved by security holders (1)

Equity compensation plans not approved by security holders

The Company’s 2021 Stock Incentive Plan was approved by the Company’s stockholders on December 2, 2021, has an effective date of October 11, 2021, and expires on October 11, 2031 (the “2021 Plan”).

The 2021 Plan provides for the granting of equity awards to employees and directors.

The maximum number of shares for which equity awards may be granted under the 2021 Plan is 500,000.

Options granted under the 2021 Plan expire no later than ten years from the date of grant or 90 days after employment ceases, whichever comes first, and vest over periods determined by the Board of Directors

The Company’s 2016 Stock Incentive Plan was approved by the Company’s stockholders on June 1, 2016, has an effective date of April 4, 2016, and expires on April 4, 2026 (the “2016 Plan”).

The 2016 Plan provides for the granting of equity awards to employees and directors.

The maximum number of shares for which equity awards may be granted under the 2016 Plan is 1,00000.

Options granted under the 2016 Plan expire no later than ten years from the date of grant or 90 days after employment ceases, whichever comes first, and vest over periods determined by the Board of Directors.

The Company’s 2006 Stock Incentive Plan was approved by the Company’s shareholders on May 18, 2006, has an effective date of April 12, 2006, and expired April 12, 2016.

The 2006 Plan provided for the granting of equity awards to key employees, including officers and directors.

The maximum number of shares for which equity awards could be granted under the 2006 Plan was 195,000.

Options under the 2006 Plan expire no later than ten years from the date of grant or after prescribed periods of time after employment ceases, whichever comes first, and vested over periods determined by the Board of Directors.

Security Ownership of Certain Beneficial Owners and Management

Based on Schedule 13G, Schedule 13D, and Section 16(a) filings, there are no persons known to us as of the date of this filing to beneficially own more than 5% of the outstanding shares of our common stock.

The following tables set forth the beneficial ownership of our common stock held as of February 29, 2024, by each current director, each Named Executive Officer;

and by all current directors and executive officers as a group.

Security Ownership of Management

Name and Address of Beneficial Owner (1)

Amount and Nature of

Beneficial Ownership

James Benoit, Jr., Chairman, Director, Chief Executive Officer

Hannon, Chief Financial Officer

Becker, Director

DiPaula, Jr., Director

Johnson, Jr., Director

Pickle, Director

Wachtel, Director

All directors and executive officers as a group

Beneficial Ownership represents less than 1% of the class of shares.

The address of record for all directors and executive officers is care of the Company at 12015 Lee Jackson Memorial Hwy, Ste 210, Fairfax VA 22033.

The foregoing percentages are based on the number of shares of our common stock outstanding as of February 29, 2024, of 2,013,180, and for each beneficial owner and all directors and officers as a group includes all options and warrants exercisable within 60 days of February 29, 2024.

Includes 112,000 shares issuable upon the exercise of options and 77,333 shares issuable upon the exercise of warrants to purchase common stock.

Includes 18,833 shares issuable upon the exercise of options.

Includes 5,500 shares issuable upon the exercise of options.

Includes 5,000 shares issuable upon the exercise of options and 5,856 shares issuable upon the exercise of warrants to purchase common stock.

Includes 7,000 shares issuable upon the exercise of options and 3,500 shares issuable upon the exercise of warrants to purchase common stock.

Includes 9,500 shares issuable upon the exercise of options and 6,829 shares issuable upon the exercise of warrants to purchase common stock.

Includes 8,500 shares issuable upon the exercise of options and 2,500 shares issuable upon the exercise of warrants to purchase common stock.

On August 12, 2024, the board of directors of the Company approved the Firefly Neuroscience, Inc.

2024 Long-Term Incentive Plan.

The maximum number of shares of common stock that may be issued pursuant to awards granted under the 2024 Plan is 833,333 shares.

Cancelled and forfeited stock options and stock awards may again become available for grant under the Plan.

For a description of the 2024 Plan, see Item 11.

“ Executive Compensation – Firefly Neuroscience, Inc.- Firefly Neuroscience, Inc.

2024 Long-Term Incentive Plan ” .

Represents shares available for award grant purposes under the 2024 Plan.

Includes both vested and unvested options to purchase common stock under the Firefly 2007 Incentive Plan and the Firefly 2023 Incentive Plan.

Does not include any restricted stock that has been granted subject to forfeiture as of December 31, 2024.

No additional awards may be granted under the Firefly 2007 Incentive Plan and the Firefly 2023 Incentive Plan after the Merger.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

A "Related Party Transaction" is any transaction directly or indirectly involving any related party that would need to be disclosed under Item 404(a) of Regulation S-K.

The Company has determined as a policy that any Related Party Transaction requires the approval of the Board of Directors.

On September 27, 2023, the Company sold 35,000 shares of common stock to G.

The following includes a summary of transactions since the beginning of our 2023 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item 11.

“ Executive Compensation ” above).

We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

For purposes of this item, references to “ WaveDancer ” refer to the former WaveDancer, prior to the consummation of the Merger.

Transactions Involving the Merger

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 to purchase up to 504,323 shares of our Common Stock, and (iii) Warrants to purchase up to 823,530 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 October 17, 2023, and June 30, 2024, we raised an aggregate of $3,039,000 from a private placement of 2,374,219 Series C units (the “Series C Units”), which such Series C Units were comprised of shares of Series C Preferred Stock and warrants to purchase up to 2,374,665 shares of Common Stock, which were sold at a combined purchase price of $1.28 per Series C Unit.

Each warrant has an exercise price of $2.56 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.

WaveDancer Related Party Transactions

The following is a summary of transactions since January 1, 2022, to which WaveDancer has been a party, in which the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of WaveDancer ’ s total assets as of the end of the last two completed fiscal years and in which any of the expected directors, executive officers or holders of more than 5% of capital stock of the continuing company, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.

The transactions described below occurred prior to the consummation of the Merger.

WaveDancer believes the terms obtained or consideration that WaveDancer paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

In connection with a private placement of its shares, in August 2022, WaveDancer sold 157,256 shares of its common stock at a price of $12.00 per share to 16 accredited investors.

The investors included G.

James Benoit, Jr., Chairman and Chief Executive Officer, who purchased 50,000 shares at an aggregate price of $600,000, James C.

DiPaula, director, who purchased 20,834 shares at an aggregate price of $250,000, and William C.

Pickle, director, who purchased 4,167 shares at an aggregate price of $50,000.

On September 29, 2023, WaveDancer sold 35,000 shares of common stock to G.

James Benoit, Jr., Chairman and Chief Executive Officer, at a price of $5.00 per share in a private placement offering from which it raised aggregate gross proceeds of $175,000.

During the fiscal year ending December 31, 2023, the Company did not engage in any additional Related Party Transactions.

Our Board has determined that the following members of the Board qualify as independent under the definition promulgated by the NASDAQ Stock Market:

There are no family relationships between any directors or executive officers of the Company.

Principal Accountant Fees and Services ( CohnReznick LLP , Tysons, Virginia , PCAOB ID 596 )

The following table presents fees for professional audit services rendered by CohnReznick LLP for the audits of the Company's annual financial statements for the years ended December 31, 2023 and 2022, respectively, and fees billed for other services rendered by our principal accountants during those periods.

38,587 61,018

Total Fees and Services

Audit Fees consist of fees for professional services rendered for the audit of the Company’s annual financial statements and for the review of the Company’s financial statements included in its quarterly reports on Form 10‑Q.

Tax Fees consist of fees related to tax compliance, tax advice and tax planning services.

Policy on Audit Committee Pre-Approval

In accordance with its written charter, our Audit Committee pre-approves all audit and permissible non-audit services, including the scope of contemplated services and the related fees, that are to be performed by CohnReznick LLP, our independent registered public accounting firm, subject to the de minimis exceptions described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit.

The Audit Committee's pre-approval of non-audit services involves consideration of the impact of providing such services on CohnReznick LLP's independence.

All 2023 and 2022 non-audit services were pre-approved by the Audit Committee.

Exhibits, Financial Statement Schedules

The following is an explanation of documents filed as part of this report:

Financial Statements .

Reference is made to the Index to Consolidated Financial Statements on page F-1, where these documents are listed.

Financial Statement Schedules .

Financial statement schedules have been omitted because the required information is not applicable, or not present in amounts sufficient to require submission of the schedules, or because the information is included in the financial statements or notes thereto.

A list of exhibits required to be filed as a part of this Annual Report on Form 10-K is set forth in the Exhibit Index, which is presented elsewhere in this document and incorporated herein by reference.

Benoit is the principal stockholder of Wavetop, which purchased Tellenger in connection with the Merger for $1.5 million.

Firefly Related Party Transactions

Other than as described in the section “ Management - Board Leadership Structure - Director Independenc e” as related to the Lipschitz Agreement (as defined herein) and Note 14 in the financial statements, since January 1, 2024, there were no transactions with executive officers, directors or their immediate family members which were in an amount in excess of $120,000, and in which any of the expected directors, executive officers or holders of more than 5% of capital stock of the continuing company, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.

Other Transactions

Indemnification Agreements

In connection with the Merger, on the Closing Date, we entered into indemnification agreements (each, an “Indemnification Agreement” and collectively, the “Indemnification Agreements”) with each of our directors and executive officers.

The Indemnification Agreements provide for indemnification and advancement by us of certain expenses and costs relating to claims, suits, or proceedings arising from service to us or, at our request, service to other entities to the fullest extent permitted by applicable law.

Compensation Matters

We have entered into employment agreements with certain of our executive officers.

For a description of agreements with our named executive officers, see the section titled “ Executive Compensation - Executive Compensation Arrangements ” included elsewhere in this filing.

We have granted equity awards to certain of our executive officers.

For a description of equity awards granted to our named executive officers, see the section titled “ Executive Compensation ” included elsewhere in this filing.

Other than as described in the section “Management-Board Leadership Structure-Director Independence” as related to the Lipschitz Agreement (as defined herein) and Note 14 to the Financial Statements, since January 1, 2024, there were no transactions with executive officers, directors or their immediate family members which were in an amount in excess of $120,000, and in which any of the expected directors, executive officers or holders of more than 5% of capital stock of the continuing company, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.

Related Party Transactions Policy

Pursuant to the Charter of the Audit Committee, the Audit Committee has adopted a written related person transaction policy that sets forth the following policies and procedures for the review and approval or ratification of related person transactions.

Pursuant to such policy, the Audit Committee shall review and approve, prior to our entry into any such transactions, all transactions in which we are or will be a participant, which would be reportable by us under Item 404 of Regulation S-K promulgated under the Securities Act as a result of any of the following persons having or expected to have a direct or indirect material interest (a “Related Person Transaction”):

executive officers;

members of the Board;

beneficial holders of more than 5% of our securities;

immediate family members of any of the foregoing persons, with such immediate family members defined as any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and any person (other than a tenant or an employee) sharing the household with the executive officer, director or 5% beneficial owner;

any other persons whom the Board determines may be considered to be related persons as defined by Item 404 of Regulation S-K promulgated under the Securities Act.

In reviewing and approving such transactions, the Audit Committee shall obtain, or shall direct management to obtain on its behalf, all information that the Audit Committee believes to be relevant and important to a review of the transaction prior to its approval.

Following receipt of the necessary information, a discussion shall be held of the relevant factors if deemed to be necessary by the Audit Committee prior to approval.

If a discussion is not deemed to be necessary, approval may be given by written consent of the Audit Committee.

This approval authority may also be delegated to the Chairperson of the Audit Committee in some circumstances.

No Related Person Transaction shall be entered into prior to the completion of these procedures.

The Audit Committee or the Chairperson of the Audit Committee, as the case may be, shall approve only those Related Person Transactions that are determined to be in, or not inconsistent with, our and our stockholders’ best interests, taking into account all available facts and circumstances as the Audit Committee or the Chairperson determines in good faith to be necessary in accordance with principles of Delaware law generally applicable to directors of a Delaware corporation.

No member of the Audit Committee shall participate in any review, consideration or approval of any Related Person Transaction with respect to which the member or any of his or her immediate family members has an interest.

The Audit Committee shall adopt any further policies and procedures relating to the approval of Related Person Transactions that it deems necessary or advisable from time to time.

Director Independence

We are required to comply with Nasdaq’s rules in determining whether a director is independent.

With respect to its analysis of Mr.

Lipschitz’s independence, the Board considered that certain strategic agreement, dated as of August 12, 2024, by and between us and Bower Four Corp.

(the “Lipschitz Agreement”).

Pursuant to the Lipschitz Agreement, Mr.

Committees of the Board of Directors

The Board established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

The composition and responsibilities of each of the committees of the Board are described below.

Members serve on these committees until their resignation or until otherwise determined by the Board.

The Board may establish other committees as it deems necessary or appropriate from time to time.

Audit Committee

The Audit Committee consists of Brian Posner, David DeCaprio and Stella Vnook.

The Board has determined that each member of the Audit Committee qualifies as “independent” under Nasdaq listing standards and Rule 10A-3(b)(1) of the Exchange Act.

The chairperson of the Audit Committee is Brian Posner.

The Board has determined that Brian Posner is an “audit committee financial expert” within the meaning of SEC regulations.

Each member of our Audit Committee can read and understand fundamental financial statements in accordance with applicable requirements.

In arriving at these determinations, the Board has examined each audit committee member’s scope of experience and the nature of their employment.

The primary purpose of the Audit Committee is to assist the Board in its oversight of our accounting and financial reporting processes and our compliance with legal and regulatory requirements.

To assist the Board in fulfilling its responsibilities, the Audit Committee:

(A) oversees:

(i) audits of our financial statements;

(ii) the integrity of our financial statements;

(iii) our processes relating to risk management and the conduct and systems of internal control over financial reporting and disclosure controls and procedures;

(iv) the qualifications, engagement, compensation, independence and performance of our independent auditor, and the auditor’s conduct of the annual audit of our financial statements and any other services provided to us;

and (v) the performance of our internal audit function, if any;

and (B) produces the annual report of the Audit Committee.

Specific responsibilities of the Audit Committee include, but are not limited, to:

appoint, compensate, and oversee the work of any independent auditor;

resolve any disagreements between management and the independent auditor regarding financial reporting;

pre-approve all audit and permitted non-audit services by the independent auditor;

retain independent counsel, accountants, or other advisors or consultants to advise and assist the Audit Committee in carrying out its duties, without needing to seek approval for the retention of such advisors or consultants from the Board, and determine the appropriate compensation for any such advisors or consultants retained by the Audit Committee;

seek any information it requires from our employees or any direct or indirect subsidiary, all of whom are directed to cooperate with the Audit Committee’s requests, or external parties;

meet with any officer or employee, the independent auditor or outside counsel, as necessary, or request that any such persons meet with any members of, or advisors or consultants to, the Audit Committee;

oversee that management has established and maintained processes to assure our compliance with applicable laws, regulations and corporate policy.

Compensation Committee

The Compensation Committee of the Board (the “Compensation Committee”) consists of David DeCaprio, Stella Vnook and Brian Posner.

The chairperson of the Compensation Committee is David DeCaprio.

The Board has determined each member of the Compensation Committee qualifies as “independent” under Nasdaq listing standards and as “non-employee directors” as defined in Rule 16b-3 promulgated under the Exchange Act.

The primary purpose of the Compensation Committee is to (A) assist the Board in overseeing our employee compensation policies and practices, including (i) determining and approving the compensation of our Chief Executive Officer and other executive officers, and (ii) reviewing and approving incentive compensation and equity compensation policies and programs, and exercising discretion in the administration of such programs;

and (B) produce a compensation discussion and analysis (“CD&A”) of the Compensation Committee, if required by applicable SEC rules.

Specific responsibilities of the Compensation Committee include, but are not limited, to:

establish a compensation policy for executive officers designed to (i) enhance our profitability and increase stockholder value;

(ii) reward executive officers for their contribution to our growth and profitability;

(iii) recognize individual initiative, leadership, achievement, and other contributions;

and (iv) provide competitive compensation that will attract and retain qualified executives;

review competitive practices and trends to determine the adequacy of the executive compensation program;

review and consider participation and eligibility in the various components of the total executive compensation package;

annually review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals and objectives, and recommend to the Board the CEO’s compensation levels based on this evaluation;

the CEO may not be present during any deliberations or voting with respect to the CEO’s compensation;

annually review and make recommendations to the Board with respect to compensation of our directors and executive officers other than the CEO;

approve employment contracts, severance arrangements, change in control provisions and other agreements;

approve and administer cash incentives and deferred compensation plans for executive officers (including any modification to such plans) and oversight of performance objectives and funding for executive incentive plans;

approve and oversee reimbursement policies for directors and executive officers;

approve and oversee compensation programs involving the use of our stock;

if we are required by applicable SEC rules to include a CD&A in our SEC filings, review the CD&A prepared by management, discuss the CD&A with management and, based on such review and discussions, recommend to the Board that the CD&A be included in our Annual Report on Form 10-K, proxy statement, or any other applicable filing as required by the SEC;

review all compensation policies and practices for all employees to determine whether such policies and practices create risks that are reasonably likely to have a material adverse effect on us;

periodically review executive supplementary benefits and, as appropriate, the organization’s retirement, benefit, and special compensation programs involving significant cost;

fulfill such other duties and responsibilities as may be assigned to the Compensation Committee, from time to time, by the Board and/or the Executive Chairman of the Board.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee of the Board (the “Nominating Committee”) consists of David DeCaprio, Stella Vnook and Brian Posner.

The chairperson of the Nominating Committee is Stella Vnook.

The Board has determined which members of the Nominating Committee qualify as independent under the Nasdaq listing standards.

Specific responsibilities of the nominating and corporate governance committee include, but are not limited, to:

evaluate the current composition, organization and governance of the Board and its committees, and make recommendations to the Board for approval;

annually review for each director and nominee, the particular experience, qualifications, attributes or skills that contribute to the Board’s conclusion that the person should serve or continue to serve as our director, as well as how the directors’ skills and background enable them to function well together as a Board;

determine desired Board member skills and attributes and conduct searches for prospective directors whose skills and attributes reflect those desired;

evaluate and propose nominees for election to the Board;

administer the annual Board performance evaluation process, including conducting surveys of director observations, suggestions and preferences;

evaluate and make recommendations to the Board concerning the appointment of directors to Board committees, the selection of Board committee chairs, and proposal of the slate of directors for election to the Board.;

as necessary in the Nominating Committee’s judgment from time to time, retain and compensate third party search firms to assist in identifying or evaluating potential nominees to the Board;

develop, adopt and oversee the implementation of a Code of Business Conduct and Ethics for all our directors, executive officers and employees;

review and maintain oversight of matters relating to the independence of Board and committee members, keeping in mind the independence standards of the Sarbanes-Oxley Act of 2002 and the rules of Nasdaq;

oversee and assess the effectiveness of the relationship between the Board and Corporation management;

maintain appropriate records regarding its process of identifying and evaluating candidates for election to the Board.

Disclosure Controls and Procedures Committee

The members of the Disclosure Controls and Procedures Committee are the officers of the Company.

The Chief Financial Officer of the Company acts as the chair of the committee.

The Disclosure Controls and Procedures Committee assists the Company’s officers in fulfilling the Company’s and their responsibilities regarding (i) the identification and disclosure of material information about the Company and (ii) the accuracy, completeness and timeliness of the Company’s financial reports under the Exchange Act and the rules of Nasdaq.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Independent Auditors ’ Fees

The aggregate fees billed to the Company by Turner, Stone & Company, L.L.P., the Company’s prior auditor, and Marcum Canada, LLP, the Company’s principal registered public accounting firm performing services in connection with engagements for which independence is required (the “principal accountant”), for the indicated services for each of the last two fiscal years were as follows:

Audit-Related Fees

All Other Fees

As used in the table above, the following terms have the meanings set forth below.

Audit fees consist of aggregate fees billed for each of the last two fiscal years for professional services performed by the Company’s principal accountant for the audit of the financial statements included in our Annual Reports on Form 10-Q and review of the financial statements included in our Quarterly Reports on Form 10-Q, reviews of registration statements and issuances of consents, and services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years.

Audit-Related Fees

Audit-related fees consist of aggregate fees billed for each of the last two fiscal years for assurance and related services performed by the Company’s principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.

We did not engage our principal accountant to provide assurance or related services during the last two fiscal years.

Tax fees consist of aggregate fees billed for each of the last two fiscal years for professional services performed by the Company’s principal accountant with respect to tax compliance, tax advice, tax consulting and tax planning.

We did not engage our principal accountant to provide tax compliance, tax advice or tax planning services during the last two fiscal years.

All Other Fees

All other fees consist of aggregate fees billed for each of the last two fiscal years for products and services provided by the Company’s principal accountant, other than for the services reported under the headings “ Audit Fees ,” “ Audit-Related Fees ” and “ Tax Fees ” above.

We did not engage our principal accountant to render services to us during the last two fiscal years, other than as reported above.

Pre-Approval Policies and Procedures

The Audit Committee has reviewed and approved, or the board of directors of the Company has reviewed and approved by unanimous written consent, all fees earned in 2024 and 2023 by the Company’s principal accountant, and actively monitored the relationship between audit and non-audit services provided.

The Audit Committee and the board of directors has concluded that the fees earned by the principal accountant were consistent with the maintenance of the principal accountant’s independence in the conduct of its auditing functions.

The Company’s principal accountant did not provide, and the Audit Committee or the board of directors of the Company did not approve, any services that would have been described under “— Tax Fees ”, “— Audit-Related Fees ”, or “— All Other Fees ” above for either of the last two fiscal years.

The Audit Committee annually considers the provision of audit services.

The Audit Committee must pre-approve all services provided and fees earned by the Company’s principal accountant.

The Audit Committee has established pre-approval policies and procedures that are detailed as to the particular service, that require that the Audit Committee be informed of each service, and that do not include delegation of the Audit Committee’s responsibilities under the Exchange Act to management.

The pre-approval policies and procedures provide only for defined audit services and, if any, specified audit-related fees, tax services, and other services, and may impose specific dollar value limits for the fees for pre-approved services.

The Audit Committee also considers on a case-by-case basis specific engagements that are not otherwise pre-approved under the pre-approval policies and procedures or that materially exceed pre-approved fee amounts.

On an interim basis, any proposed engagement that does not fit within the definition of a pre-approved service may be presented to a designated member of the Audit Committee for approval and to the full Audit Committee at its next regular meeting.

The percentage of hours expended on the Company’s principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was not greater than 50%.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

(a) List of Documents Filed as a Part of This Report:

(1) Index to Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

Notes to Consolidated Financial Statements

(2) Index to Financial Statement Schedules:

All schedules have been omitted because the required information is included in the financial statements or the notes thereto, or because it is not required.

(3) Index to Exhibits:

See exhibits listed under “— (b) Exhibits ” below.

(b) Exhibits:

Agreement and Plan of Merger, dated November 15, 2023, by and among WaveDancer, Inc., FFN Merger Sub, Inc., and Firefly Neuroscience, Inc.

(incorporated herein by reference to Annex A-1 to the Company ’ s registration statement on Form S-4/A, filed with the SEC on February 2, 2024).

Amendment No.

1 to Agreement and Plan of Merger, dated January 12, 2024, by and among by and among WaveDancer, Inc., FFN Merger Sub, Inc., and Firefly Neuroscience, Inc.

(incorporated herein by reference to Annex A-2 to the Company ’ s registration statement on Form S-4/A, filed with the SEC on February 2, 2024).

Amendment No.

2 to Agreement and Plan of Merger, dated June 17, 2024, by and among by and among WaveDancer, Inc., FFN Merger Sub, Inc., and Firefly Neuroscience, Inc.

(incorporated herein by reference to Exhibit 2.1 to the Company ’ s Current Report on Form 8-K, filed with the SEC on June 21, 2024).

Stock Purchase Agreement between Registrant and Wavetop Solutions, Inc., dated November 15, 2023 (incorporated herein by reference to Annex F to the Company’s registration statement on Form S-4/A, filed with the SEC on February 2, 2024).

Amended and Restated Certificate of Incorporation of Firefly Neuroscience, Inc (incorporated herein by reference to Exhibit 3.1 to the Company’ s Current Report on Form 8-K, filed with the SEC on August 12, 2024).

Amended and Restated Bylaws of Firefly Neuroscience, Inc.

(incorporated herein by reference to Exhibit 3.2 to the Company’ s Current Report on Form 8-K, filed with the SEC on August 12, 2024).

Description of Capital Stock of Firefly Neuroscience, Inc.

Form of Series C Warrant (incorporated herein by reference to Exhibit 4.1 to the Company’s registration statement on Form S-1 filed with the SEC on September 27, 2024).

Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the Company’ s Current Report on Form 8-K, filed with the SEC on July 29, 2024).

Form of Pre-Funded Warrant (incorporated herein by reference to Exhibit 4.2 to the Company’ s Current Report on Form 8-K, filed with the SEC on July 29, 2024).

Form of Series D Warrant (incorporated herein by reference to Exhibit 4.4 to the Company’s registration statement on Form S-1 filed with the SEC on September 27, 2024).

Form of Broker Warrant (incorporated herein by reference to Exhibit 4.5 to the Company’s registration statement on Form S-1 filed with the SEC on September 27, 2024).

Form of Common Stock Purchase Warrant

Form of Pre-Funded Common Stock Purchase Warrant

Common Stock Purchase Warrant issued to Canaccord Genuity Corp., dated as of March 28, 2025

Share Option Plan (incorporated herein by reference to Exhibit 10.12 to the Company’s registration statement on Form S-4, filed with the SEC on January 22, 2024).

Firefly Neuroscience, Inc.

2024 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Company ’ s Current Report on Form 8-K, filed with the SEC on August 12, 2024).

Form of Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.6 to the Company ’ s Current Report on Form 8-K, filed with the SEC on August 12, 2024).

Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.7 to the Company ’ s Current Report on Form 8-K, filed with the SEC on August 12, 2024).

Form of Deferred Stock Unit Agreement

Form of Restricted Stock Unit Agreement

Form of Restricted Stock Award Agreement

Employment Agreement, dated February 2, 2017, by and between Firefly Neuroscience, Ltd.

(formally known as Elminda Ltd.) and Gil Issachar

Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.8 to the Company ’ s Current Report on Form 8-K, filed with the SEC on August 12, 2024).

Common Stock Purchase Agreement by and between WaveDancer, Inc.

Riley Principal Capital II, LLC dated July 8, 2022 (incorporated herein by reference to Exhibit 10.1 to the Company ’ s Current Report on Form 8-K, filed with the SEC on July 11, 2022).

Registration Rights Agreement by and between the Registrant and B.

Riley Principal Capital II, LLC dated July 8, 2022 (incorporated herein by reference to Exhibit 10.2 to the Company ’ s Current Report on Form 8-K, filed with the SEC on July 11, 2022).

Securities Purchase Agreement, dated as of July 26, 2024, by and among the Company and the investors signatory thereto (incorporated herein by reference to Exhibit 10.1 to the Company’ s Current Report on Form 8-K, filed with the SEC on July 29, 2024)

Master Services Agreement, dated as of June 27, 2024, by and between Firefly Neuroscience, Inc.

and Deal, Inc.

Form of Convertible Promissory Note issued to Helena Special Opportunities LLC (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 23, 2024)

Form of Common Stock Purchase Warrant issued to Helena Special Opportunities LLC (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on December 23, 2024)

Securities Purchase Agreement, dated December 20, 2024, between Firefly Neuroscience, Inc.

and Helena Special Opportunities LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 23, 2024)

Registration Rights Agreement, dated December 20, 2024, between Firefly Neuroscience, Inc.

and Helena Special Opportunities LLC (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on December 23, 2024)

Security Agreement, dated December 20, 2024, among Firefly Neuroscience, Inc., Firefly Neuroscience Ltd., Firefly Neuroscience Canada, Elminda 2022 Inc., Elminda Canada Inc., and Helena Special Opportunities LLC (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on December 23, 2024)

Purchase Agreement, dated December 20, 2024, between Firefly Neuroscience, Inc.

and Arena Business Solutions Global SPC II, Ltd (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on December 23, 2024)

Employment Agreement, dated as of March 12, 2025, by and between Deel Canada Services, Inc.

and Paul Krzywicki

Executive Employment Agreement, dated March 27, 2025, by and between Firefly Neuroscience, Inc.

and Greg Lipschitz (incorporated herein by reference to Exhibit 10.1 to the Company ’ s Current Report on Form 8-K, filed with the SEC on March 31, 2025)

Form of Private Placement Subscription Agreement between Firefly Neuroscience, Inc.

and the Subscribers

Code of Ethics and Business Conduct

Letter from Turner, Stone & Company LLP to the Securities and Exchange Commission dated October 31, 2024 (incorporated herein by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 1, 2024).

Firefly Neuroscience, Inc.

Insider Trading Policy

List of Subsidiaries (incorporated herein by reference to Exhibit 21.1 to the Registrant’ s Current Report on Form 8-K filed on August 12, 2024).

Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Financial and Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Financial and Accounting Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Firefly Neuroscience, Inc.

Clawback Policy

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Executive Compensation plan or arrangement

FORM 10-K SUMMARY.

WAVEDANCER, INC.

AND SUBSIDIARIES

FIREFLY NEUROSCIENCE, INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

FIREFLY NEUROSCIENCE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

(INCLUDING REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)

Years Ended December 31, 2023 and 2022

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations for the years ended December 31, 2023 and 2022

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023 and 2022

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

WaveDancer, Inc.

To the Stockholders and Board of Directors of

Firefly Neuroscience, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of WaveDancer, Inc.

(the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the entity will continue as a going concern.

As discussed in Note 1 to the financial statements, the entity has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern.

We have audited the accompanying consolidated balance sheet of Firefly Neuroscience, Inc.

(the “Company”) as of December 31, 2024, the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America .

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on these financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgements.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Discontinued Operations (Notes 1, 2 and 6 to the Financial Statements)

Critical Audit Matter

On March 17, 2023, the Company entered into and completed the sale of all of the shares of Gray Matters, Inc.

(“GMI”) to Gray Matters Data Corporation (“GMDC”).

The Company received cash and common stock in GMDC as consideration, along with contingent payments to be received.

GMI represented all of the operations of the Company’s Blockchain SCM segment and as such management determined that the sale met the criteria to be classified and presented as discontinued operations for all periods presented in accordance with Accounting Standard Codification 205-20, Discontinued Operations (“ASC 205-20”).

Significant judgment is exercised by the Company in the identification, segregation, and presentation and disclosure of discontinued operations related to the sale of GMI.

Given these factors, the related audit effort in evaluating management’s judgments in determining the matter was challenging, subjective, and complex and required a high degree of auditor judgment.

How our audit addressed the Critical Audit Matter

Our principal audit procedures related to the Company’s determination of discontinued operations for the Gray Matters reporting unit included the following:

We gained an understanding of and evaluated the design and implementation of the Company’s controls that address the risk of material misstatement related to the Company's discontinued operations assessment process.

We obtained and evaluated the Company's memorandum that documented management's presentation and disclosure conclusions with respect to the relevant accounting standards.

We tested the classification of amounts included in discontinued operations by agreeing such amounts to the Company's historical accounting records.

With the assistance of our firm’s valuation professionals with specialized skills and knowledge, we tested the Company’s discounted cash flow models, including certain assumptions such as the discount rates and terminal value as well as the estimates of the fair value of rollover equity and contingent payments to be received from the buyers of GMI in the first quarter of 2023.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Convertible Promissory Note

As disclosed in Note 9, the Company entered into a securities purchase with a lender and issued a convertible promissory note and common stock warrants.

The Company concluded that the embedded conversion feature within the convertible promissory note should be accounted for as a derivative liability and the warrants were classified as equity.

The Company has exercised significant amount of judgement into how the conversion feature of the convertible promissory note should be accounted for under the basis of the accounting principles generally accepted in the United States of America.

We identified the evaluation of the accounting treatment of the convertible promissory note as a critical audit matter due to the nature and extent of audit effort required to obtain sufficient appropriate audit evidence to address the risks of material misstatement related to the accounting and disclosure of the Company’s convertible promissory note.

The nature and extent of audit effort required to address the matter included significant involvement of more experienced engagement team members.

The primary procedures we performed to address this critical audit matter included the following:

We examined the executed securities purchase agreement and analyzed the terms in the agreement, such as the conversion price and conversion price adjustments, events of default, and other terms of the convertible note, and evaluated management’s analysis, accounting memorandum and supporting schedules.

We evaluated and tested management’s assumptions, including, but not limited to, peer company selection for volatility calculations and interest rate applied, and applicability to the general accepted accounting principles of the United States of America.

We concluded on the classification, valuation and accuracy of the accounting treatment and disclosure of the convertible promissory note.

/s/ MARCUM CANADA LLP

Marcum Canada LLP

(PCAOB ID 7192 )

We have served as the Company’s auditor since 2024.

/s/CohnReznick LLP

Tysons, Virginia

March 20, 2024

WAVEDANCER, INC.

AND SUBSIDIARIES

Toronto, ON, Canada

April 2 , 2025

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Firefly Neuroscience, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Firefly Neuroscience, Inc.

as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 of the notes to consolidated financial statements, the Company suffered a loss from operations and will require significant capital to sustain operations that raises substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We have served as Firefly Neuroscience, Inc.'s auditor since 2023.

Dallas, Texas

May 22, 2024, except Note 22, as to which the date is January 13, 2025.

Turner, Stone & Company, L.L.P.

Accountants and Consultants

12700 Park Central Drive, Suite 1400

Dallas,Texas 75251

972-239-1660 ⁄ Facsimile:

turnerstone.com

FIREFLY NEUROSCIENCE, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2023

December 31, 2022

AS OF DECEMBER 31, 2024 AND 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Current assets

Cash and cash equivalents

$ 1,810 $ 2,143

Accounts receivable

1,117,862 1,629,559

Prepaid expenses and other current assets

267,351 442,445

Accounts receivable, net

Prepaid expenses and deposits

Total current assets

2,067,208 2,803,085

Intangible assets, net of accumulated amortization of $ 484,461 and $ 308,217 , respectively

1,005,539 1,181,783

1,125,101 1,125,101

Right-of-use operating lease asset

245,569 376,104

Property and equipment, net of accumulated depreciation and amortization of $ 432,620 and $ 391,628 , respectively

57,999 98,991

18,419 79,305

Assets held for sale

Non current assets

Prepaid expenses and deposits

Equipment, net

Intangible assets, net

Total non current assets

$ 4,601 $ 2,641

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

1 unchanged sentence

$ 1,816 $ 630

Revolving line of credit

500,000 425,000

Accrued payroll and related liabilities

615,766 676,796

Commissions payable

30,223 125,033

Income taxes payable

Other accrued liabilities

267,604 283,497

Contract liabilities

114,540 182,756

Operating lease liabilities - current

163,282 203,342

Deferred acquisition consideration

Accrued liabilities

Deferred revenue

Convertible promissory note, net of unamortized discount

Derivative liability

Total current liabilities

2,098,306 3,888,412

Operating lease liabilities - non-current

136,652 303,778

Deferred tax liabilities, net

16,187 59,121

TOTAL LIABILITIES

2,251,145 4,251,311

Stockholders' equity

Common stock, $ 0.001 par value 100,000,000 shares authorized;

2,180,485 and 2,083,860 shares issued, 2,013,180 and 1,916,555 shares outstanding as of December 31, 2023 and 2022, respectively

COMMITMENTS AND CONTINGENCIES (See Note 11)

SHAREHOLDERS ’ EQUITY (DEFICIT)

Preferred shares, $ 0.0001 par value:

1,000,000 shares authorized – 2024

3,120,000 shares authorized – 2023

Nil and 1,676,165 issued and outstanding at December 31, 2024 and 2023, respectively

Common shares, $ 0.0001 par value:

100,000,000 shares authorized – 2024

258,880,000 shares authorized – 2023

8,122,060 and 3,678,550 issued and outstanding at December 31, 2024 and 2023, respectively

Additional paid-in capital

2 unchanged sentences

( 87,084 ) ( 76,624 )

Treasury stock, 167,305 shares at cost, as of December 31, 2023 and 2022

( 965,211 ) ( 965,211 )

Total stockholders' equity

2,268,690 3,729,903

Total liabilities and stockholders' equity

$ 4,519,835 $ 7,981,214

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

WAVEDANCER, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,

Professional fees

$ 7,793,163 $ 8,347,052

Software sales

188,812 2,675,930

Total revenues

7,981,975 11,022,982

Cost of revenues

Cost of professional fees

5,180,508 5,651,424

Cost of software sales

187,170 2,508,714

Total cost of revenues excluding depreciation and amortization

TOTAL SHAREHOLDERS ’ EQUITY (DEFICIT)

TOTAL LIABILITIES AND SHAREHOLDERS ’ EQUITY

$ 4,601 $ 2,641

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

FIREFLY NEUROSCIENCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

OPERATING EXPENSES:

Research and development expenses

Selling and marketing expenses

General and administration expenses

Impairment of intangible assets 874 -

TOTAL OPERATING EXPENSES

OPERATING LOSS

( 10,054 ) ( 3,078 )

Selling, general and administrative expenses

OTHER INCOME (EXPENSE)

Interest and bank fees

( 69 ) ( 18 )

Gain on litigation settlement

Foreign exchange gain

Change in derivative fair value

Other income (expenses)

T OTAL OTHER INCOME (EXPENSE) ( 404 ) 476

LOSS BEFORE INCOME TAX

( 10,458 ) ( 2,602 )

Operating loss from continuing operations

Income tax provision

NET LOSS AND COMPREHENSIVE LOSS

$ (10,460 ) $ ( 2,603 )

Gain on sale of equity investment and settlement of contingent consideration receivable

Other income, net

Interest expense

BASIC AND DILUTED LOSS PER SHARE

$ ( 1.60 ) $ ( 0.81 )

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

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

6,546,769 3,233,270

Income tax (benefit) expense

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

FIREFLY NEUROSCIENCE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

(IN THOUSANDS, EXCEPT SHARE DATA)

Preferred stock

Number of shares to be issued

Number of shares

Number of shares to be issued

Additional paid-in capital

Accumulated deficit

Total Shareholder’s equity (deficit)

BALANCE AT JANUARY 1, 2023

- - $ - 265,485 - $ - $ 71,195 $ ( 74,021 ) $ ( 2,226 )

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

Common Stock Private Placement

- - - 3,383,784 - - 133 - 133

Equity in net loss of affiliate

Series B Preferred Stock Offering

1,516,199 ( 1,516,199 ) - - 1,516,199 - 2,608 - 2,608

Net loss from continuing operations

Series C Preferred Stock Units offering

159,966 - - - - - 1,902 - 1,902

Loss from discontinued operations

Share-based compensation expense

- - - 29,636 - - 295 - 295

Shares repurchase

- - - ( 439 ) - - - - -

Basic and diluted loss per share from continuing operations

- - - - - - - (2,603 ) (2,603 )

Basic and diluted loss per share from discontinued operations

BALANCE AT DECEMBER 31, 2023

1,676,165 ( 1,516,199 ) $ - 3,678,550 1,516,199 $ - $ 76,733 $ ( 76,624 ) $ 109

Basic and diluted net loss per share

Series B Preferred Stock conversion

( 1,516,199 ) 1,516,199 $ - 1,516,199 ( 1,516,199 ) $ - - - -

Weighted average common shares outstanding

Basic and diluted

Series C Preferred Stock Units offering

86,953 - - - - - 945 - 945

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

WAVEDANCER, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY

Balances at December 31, 2021

Share exchange:

former shareholders’ of WaveDancer

- - - 802,142 - -

( 204 ) - ( 204 )

Stock option compensation

Series C Preferred Stock conversion

( 246,919 ) - - 596,145 - - - - -

Private placement, net of issuance costs

- - - 319,207 - - 3,363 - 3,363

Issuance of stock from exercise of options

Shares issued for debt settlement

- - - 10,588 - - 39 - 39

Balances at December 31, 2022

Shares issued for future settlement of debt

- - - 45,344 - - - - -

Shares and warrants issued for consulting services

- - - 22,344 - - 127 - 127

Stock option compensation

Shares issued for prepaid services

- - - 433,360 - - 2,440 - 2,440

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

Shares issued - stock options, warrants and RSU exercises

- - - 698,181 - - 36 - 36

Warrants issued for convertible promissory note

- - - - - - 636 - 636

Issuance of stock from exercise of options

Share-based compensation expense

- - - - - - 2,594 - 2,594

Amortization of stock issue costs

- - - - - - - (10,460 ) (10,460

Balances at December 31, 2023

BALANCE AT DECEMBER 31, 2024

- - $ - 8,122,060 - $ - $ 86,709 $ ( 87,084 ) $ ( 375 )

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

WAVEDANCER, INC.

AND SUBSIDIARIES

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

FIREFLY NEUROSCIENCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

(IN THOUSANDS)

Year Ended December 31,

2 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities

Loss from discontinued operations

335,993 11,447,910

Depreciation and amortization

217,236 219,986

Stock-based compensation

710,550 1,276,455

Deferred income tax expense

( 42,934 ) ( 3,019,124 )

Amortization of right-of-use assets

130,535 183,070

Accretion of deferred acquisition consideration

27,370 80,098

Gain on litigation settlement

( 1,442,468 ) -

Gain on sale of equity investment and settlement of contingent consideration receivable

( 382,525 ) -

Equity in loss of affiliate

Interest and bank fees

Change in derivative fair value

I mpairment of intangible assets 874

Other income (expenses)

Share-based compensation expense

Shares and warrants issued for consulting services

Changes in operating assets and liabilities:

Accounts receivable

511,697 35,303

Prepaid expenses and other current assets

158,242 ( 15,455 )

60,886 ( 2,205 )

Accounts payable

( 170,348 ) ( 76,710 )

Contract liabilities

( 68,216 ) ( 4,079 )

Accrued payroll and related liabilities and other accrued liabilities

( 76,574 ) 235,259

Operating lease liability

( 207,186 ) ( 192,128 )

Commissions payable

( 94,810 ) ( 99,217 )

Cash used in operating activities of continuing operations

( 2,121,462 ) ( 7,684,675 )

Cash used in operating activities of discontinued operations

Change in accounts receivable

Change in prepaid expenses and deposits

Change in accounts payable

Change in related party payable

Change in accrued liabilities

( 341 ) 1,047

Change in deferred revenue

Net cash used in operating activities

1 unchanged sentence

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property and equipment

Payments to acquire equipment

Outflow from recapitalization transaction

Product enhancements – intangible asset

( 267 ) ( 386 )

Proceeds from sale of equity investment and settlement of contingent consideration receivable

Proceeds from disposal of business

Net cash provided by (used in) investing activities

Net cash used in investing activities

( 477 ) ( 386 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under revolving line of credit

575,000 425,000

Repayments under revolving line of credit

( 500,000 ) -

Premium financing borrowings

Premium financing repayments

( 305,759 ) -

Proceeds from issuance of stock

347,108 1,887,000

Proceeds from exercise of stock options

Proceeds from issuance of convertible promissory note, net of transaction costs

Proceeds from exercise of warrants

Proceeds from sale of shares, net of issuance costs

Net cash provided by financing activities

429,508 2,349,642

Net decrease in cash and cash equivalents

( 49,086 ) ( 4,200,221 )

Cash and cash equivalents, beginning of period

INCREASE (DECREASE) IN CASH

( 333 ) 2,085

Cash and cash equivalents, end of period

BALANCE OF CASH AT THE BEGINNING OF YEAR

BALANCE OF CASH AT THE END OF YEAR

$ 1,810 $ 2,143

Supplemental cash flow information

Interest paid

$ 73,678 $ 1,250

Cash paid for interest

Cash paid for income taxes

Non-cash investing and financing activities

Non-cash proceeds on disposal of business

$ 1,263,000 $ -

Value of common stock issued in connection with common stock purchase agreement

$ - $ 150,000

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

WAVEDANCER, INC.

AND SUBSIDIARIES

Deemed issuance of shares to former shareholders’ of WaveDancer

Product enhancements - intangible asset in accounts payable and accrued liabilities 206

Shares issued for prepaid services

Shares issued for debt

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

FIREFLY NEUROSCIENCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

Organization and Business

Founded in 1979 as Information Analysis Incorporated (“IAI”), IAI changed its name to WaveDancer, Inc.

(“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.

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

subsidiary (“GMI”) to Gray Matters Data Corporation (“GMDC”).

Subsequent to the sale, the Company discontinued consolidating GMI and the Company has reflected GMI as a discontinued operation in its consolidated statements of operations for all periods presented.

Unless otherwise noted, all amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements for 2023 and 2022 relate to the Company’s continuing operations, except Note 2, which relates to the discontinue operations and corresponding assets and liabilities held for sale of GMI.

See Note 2 for further information about the sale transaction of GMI, the deconsolidation of GMI, and treatment of GMI as a discontinued operation.

Prior to March 17, 2023, we had two operating segments:

Tellenger, the business unit that comprises all of our current products and services, and Blockchain SCM.

Given the classification of GMI, which comprised all of the material operations of the Blockchain SCM segment, as a discontinued operation (see Note 2 ) as of March 17, 2023, the Company manages its business as one reportable operating segment.

Liquidity and Going Concern

During the year ended December 31, 2023, the Company used cash from operations, excluding discontinued operations, of $ 2,121,462 and as of December 31, 2023, had a net working capital deficit of $ 31,098 , including cash and cash equivalents of $ 681,995 .

As of December 31, 2023, the Company had no borrowing availability under its bank line of credit.

On November 15, 2023, the Company and its wholly owned subsidiary, FFN, Inc.(“FFN”), entered into an Agreement and Plan of Merger (“Merger Agreement”) with Firefly Neuroscience, Inc.

FFN was incorporated solely for the purpose of entering into the Merger Agreement.

In accordance with the Merger Agreement, FFN will merge into Firefly which will become a wholly owned subsidiary of WaveDancer, WaveDancer will change its name to Firefly Neuroscience, Inc., and the Firefly shares will be converted into WaveDancer shares (the “Merger”).

The board of directors of Firefly after the Merger will consist of five members, one of whom will be designated by WaveDancer.

As a condition of the Merger Agreement, on November 15, 2023, the Company also entered into a Stock Purchase Agreement with Wavetop Solutions, Inc.(“Wavetop”), a company owned and controlled by WaveDancer's chairman and chief executive officer, to sell all of the outstanding shares of Tellenger, Inc.

to Wavetop for $ 1.5 million of cash.

Tellenger is the entity through which the Company operates its day-to-day business.

On March 14, 2024, the Company convened a special meeting of its shareholders and received the shareholder approvals required to close the Merger.

Firefly has obtained the necessary consent from its shareholders for the Merger.

The Merger Agreement requires that WaveDancer has sufficient cash on hand on the closing date to pay all its outstanding liabilities on that date including transactions fees and expenses as well as severance costs for employees that will be terminated as a result of the merger.

The Company will have to raise approximately $ 0.8 to $ 1.1 million to satisfy its obligations on the closing date.

In addition, Firefly has conditions it must satisfy in order for the Merger to close, including approval by Nasdaq Capital Markets LLC of its initial listing application.

In order to have its listing application approved by Nasdaq, Firefly will need to raise approximately $ 6 million of equity as of the closing of the Merger.

There is no assurance that the Company will successfully raise the capital it needs to close the Merger with Firefly, nor that all the other conditions precedent to the Merger closing will be satisfied, which creates substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date that the accompanying consolidated financial statements are issued.

If the Merger does not close, the Company will need to raise additional capital and reduce its operating expenses to meet its ongoing cash flow requirements and there is no assurance that such efforts would be successful.

The accompanying 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.

The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations and potential other funding sources, in addition to cash on-hand, to meet its obligations as they become due.

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

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.

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 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 2,013,180 post-split shares, after 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.

Basis of Presentation and Consolidation

DECEMBER 31, 2024 AND 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

BUSINESS DESCRIPTION

Firefly Neuroscience, Inc.

(formerly WaveDancer, Inc.), a Delaware corporation, and its wholly owned subsidiaries Firefly Neuroscience 2023, Inc., a Delaware corporation (formerly known as Firefly Neuroscience, Inc.), Firefly Neuroscience Ltd., an Israeli corporation (formerly known as Elminda Ltd.), Elminda 2022 Inc., a Delaware corporation (formerly known as Elminda Inc.), Firefly Neurosciences Canada Inc., a Canadian corporation, and Elminda Canada Inc., a Canadian corporation (collectively, the "Company"), are engaged in the development, marketing and distribution of medical devices and technology allowing high resolution visualization and evaluation of the complex neuro-physiological interconnections of the human brain.

Firefly Neuroscience Ltd.

was initially incorporated and commenced its operations as a development company in 2006 under the laws of the State of Israel, and in May 2014, initiated its marketing and distribution activity in the United States through Elminda 2022 Inc.

In July 2014, the U.S.

Food and Drug Administration (“FDA”) cleared Firefly Neuroscience Ltd.’s Brain Network Analytics (“BNA” ™) product for marketing in the USA.

On September 11, 2014, the Company received the Conformity European (“CE”) approval for BNA™ allowing its use in the European Union.

On November 15, 2023, WaveDancer, Inc.

(“WaveDancer”) and its wholly owned subsidiary, FFN Merger Sub, Inc.

(“FFN”), entered into an Agreement and Plan of Merger (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”) with Firefly Neuroscience 2023, Inc.

("Private Firefly").

In accordance with the Merger Agreement, FFN merged with and into Private Firefly, with Private Firefly surviving as a wholly owned subsidiary of WaveDancer.

On August 12, 2024, ( i) pursuant to the Amended and Restated Certificate of Incorporation of WaveDancer, Inc., WaveDancer changed its name to Firefly Neuroscience, Inc., and (ii) pursuant to an amendment to its Certificate of Incorporation Firefly, Private Firefly changed its name to Firefly Neuroscience 2023, Inc.

and (iii) Private Firefly and FFN filed the Certificate of Merger with the State of Delaware (the “Merger”).

On August 12, 2024, the Merger closed (the “Closing” and such date, the “Closing Date”).

At the effective time of the Merger, each holder of outstanding shares of Private Firefly’s common stock, par value $ 0.00001 per share (the “Private Firefly 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 Private Firefly Common Stock such stockholders held multiplied by the exchange ratio(the “Exchange Ratio”) of 0.1040 .

Additionally, upon at the effective time of the Merger:

(i) each outstanding option to purchase Private Firefly 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 Private Firefly restricted share unit outstanding immediately prior to the Closing vested pursuant to the terms thereof, and (iii) each outstanding warrant to purchase shares of Private Firefly Common Stock that was not exercised prior to the Closing was assumed by the Company, subject to certain terms contained in the Merger Agreement.

While WaveDancer was the legal acquirer of Private Firefly in the Merger, the Merger is treated as a reverse recapitalization under Generally Acceptance Accounting Principles in the United States of America (“U.S.

GAAP”), whereby Private Firefly is deemed to be the accounting acquirer, WaveDancer was deemed to be the accounting acquiree and the historical financial statements of Private Firefly were carried forward for financial reporting purpose upon the closing of the merger.

Accordingly, for accounting purposes, the Merger was treated as the equivalent of Private Firefly issuing stock for the net assets of WaveDancer, accompanied by a recapitalization.

The net assets of WaveDancer were stated at carrying values, with no goodwill or other intangible assets recorded.

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

Immediately following the closing of the Merger, on August 12, 2024, there were 7,472,555 shares of the Firefly Common Stock outstanding.

In accordance with guidance applicable to these circumstances, the equity structure has been recast in all comparative periods up to the Closing to reflect the equity structure of the legal acquirer, WaveDancer.

The shares and corresponding capital amounts and losses per share, prior to the Merger, have been retroactively restated based on shares reflecting the exchange ratio established in the Merger.

GOING CONCERN

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

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

While the Company is attempting to raise funds for commercialization, its monthly cash requirements during the year ended December 31, 2024 have been met through the sales of common stock and convertible notes.

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.

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

Ability to raise additional funds will depend on, among other factors, financial, economic and market conditions, many of which are outside of our control and there can be no assurance that we will be able to obtain additional funding on satisfactory terms or at all.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding annual financial reporting.

The accompanying consolidated financial statements include the accounts of WaveDancer, Inc.

and its consolidated subsidiaries (collectively, the “Company”, “we” or “our”).

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

Use of Estimates

Preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes.

Actual results could differ materially from these estimates due to uncertainties.

On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses;

fair values of financial instruments, reporting units, intangible assets, and goodwill;

useful lives of intangible assets and property and equipment;

the valuation of stock-based compensation, the valuation of deferred tax assets and liabilities;

and contingent liabilities, among others.

We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, and the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Revenue Recognition

See Note 3 for a detailed description of our revenue recognition policy.

Cash and Cash Equivalents

We consider all highly liquid investments with maturities of ninety days or less at the time of purchase to be cash equivalents.

Deposits are maintained with a federally insured bank.

Balances at times exceed federally insured limits, but management does not consider this to be a significant concentration of credit risk.

Principles of consolidation

These consolidated financial statements include the financial information of the Company and its subsidiaries.

The Company consolidates legal entities in which it holds a controlling financial interest.

The Company has a two -tier consolidation model:

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

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

If an entity is determined not to be a VIE, it is assessed on the basis of voting and other decision-making rights under the voting interest model.

The accounts of the subsidiaries are prepared for the same reporting period using consistent accounting policies.

All intercompany balances and transactions were eliminated on consolidation.

The consolidated assets, liabilities, and results of operations prior to the Merger are those of Private Firefly.

The shares and corresponding capital amounts and losses per share, prior to the Merger, have been retroactively restated based on shares reflecting the exchange ratio established in the Merger.

Use of estimates in the preparation of consolidated financial statements

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

Actual results could differ from those estimates and assumptions, and such differences could be material to the Company’s financial position and results of operations.

i) Share based payments

In calculating share-based compensation expense, key estimates are used such as, the stock price of the Company, the rate of forfeiture of options granted, the expected life of the option, the volatility of the Company’s stock price, and the risk-free interest rate.

ii) Warrants and Derivative liability

In calculating the fair value of warrants issued, the Company includes key estimates such as the selection of an appropriate valuation model, stock price of the Company, the expected life of the warrant, the volatility of the Company’s stock price, and the risk-free interest rate.

Functional currency and foreign currency translations

The currency of the primary economic environment in which the operations of the Company is conducted is the U.S.

dollar ("$" or "Dollar").

The reporting and the functional currency of the Company is the U.S Dollar.

The dollar figures are determined as follows:

transactions and balances originally denominated in dollars are presented at their original amounts.

Balances in non-dollar currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively.

Fair value measurement

The Company uses a three -tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.

The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

The three tiers are defined as follows:

Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities;

Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The carrying amounts of cash and equivalents, accounts receivable, other receivables, long-term deposits, accounts payable, balances to and from related party and convertible notes approximate their fair value due to the short-term maturity of such instruments.

It is management’s opinion that the Company is not exposed to any significant market or credit risks arising from these financial instruments.

Fair value of financial instruments

Cash, accounts receivable, accounts payable, related party payable and accrued liabilities are carried at amortized cost, which management believes approximates their respective fair value due to the short-term nature of these instruments.

Derivative liability of $ 827 as of December 31, 2024 is measured at fair value using an option-pricing model utilizing Level 2 inputs.

These inputs include the stock price of the Company, the expected life of the derivative liability, the volatility of the Company’s stock price, and the risk-free interest rate.

Related party

Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.

Parties are also considered to be related if they are subject to common control or common significant influence, and related parties may be individuals or corporate entities.

A transaction is a related party transaction when there is a transfer of resources or obligations between related parties.

The Company has disclosed its transactions with related parties.

The Company considers all highly liquid investments, which include short-term bank deposits that are not restricted as to withdrawal or use and the period to maturity of which did not exceed three months at time of investment, to be cash.

Accounts receivable

Our payment terms for accounts receivable vary by the types of our customers and the products or services offered.

Typically, we invoice for services on a monthly basis, and we invoice for product sales upon delivery.

We maintain an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as general and administrative expense in the consolidated statements of operations.

We assess collectability on an individual customer basis.

In determining the amount of the allowance for credit losses, we consider historical collectability based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations.

Our allowance for doubtful accounts as of December 31, 2023 and 2022 was immaterial.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets.

Furniture and fixtures are depreciated over the lesser of the useful life or five years, purchased software is depreciated over the lesser of three years or the term of the license, and computer equipment is depreciated over three years.

Leasehold improvements are amortized over the estimated term of the lease or the estimated life of the improvement, whichever is shorter.

Maintenance and minor repairs are charged to operations as incurred.

Gains and losses on dispositions are recorded in operations.

Stock-Based Compensation

The Company’s stock-based compensation plans as of December 31, 2023 are described in Note 13 below.

Total compensation expense related to these plans was $ 710,550 and $ 1,276,455 for the years ended December 31, 2023 and 2022, respectively, and is included in selling, general and administrative expenses on the consolidated statements of operations.

Stock-based compensation expense for discontinued operations, excluding the effect of option forfeitures, was $ 65,487 and $ 691,472 for the years ended December 31, 2023 and 2022, respectively.

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

When stock-based compensation is awarded, the expense is recognized ratably over the requisite service period.

The Company recognizes forfeitures at the time the forfeiture occurs.

Equity Method Investments

The Company accounts for investments in which it owns between 20% to 50% of the common stock or has the ability to exercise significant influence, but not control, over the investee using the equity method of accounting in accordance with ASC 323 - Equity Method Investments and Joint Ventures (“ASC 323” ).

Under the equity method, an investor initially records an investment in the stock of an investee at cost and adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses of the investee after the date of acquisition.

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

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.

On August 9, 2023 the Company sold all of its GMDC common stock.

During the period from March 18 through August 9, 2023, the Company accounted for its investment in GMDC in accordance with the equity method and, during that period, recognized $ 245,525 as its share of GMDC’s net loss.

See Note 2 for information about the GMI sale transaction, the deconsolidation of GMI, and the treatment of GMI as a discontinued operation.

Deferred tax assets and liabilities are computed based on the difference between the financial statement and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse.

The Company expects that recent tax law changes contained in the Inflation Reduction Act and CHIPS Act will not have a material impact on its provision for income taxes.

In addition, a valuation allowance is required to be recognized if it is believed more likely than not that a deferred tax asset will not be fully realized.

Authoritative guidance prescribes a recognition threshold of more likely than not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those positions to be recognized in the financial statements.

The Company continually reviews tax laws, regulations and related guidance in order to properly record any uncertain tax liabilities.

Loss Per Share

The Company’s loss per share calculation is based upon the weighted average number of shares of common stock outstanding.

The dilutive effect of stock options, warrants, and other equity instruments are included for purposes of calculating diluted income per share, except for periods when the Company reports a net loss, in which case the inclusion of such equity instruments would be antidilutive.

Concentration of Credit Risk

During the year ended December 31, 2023, the Company’s prime contracts with U.S.

government agencies represented 8.8 % of revenue and subcontracts under federal procurements represented 89.7 % of revenue.

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

Three subcontracts under federal procurements represented 29.9 %, 20.5 % and 17.7 % of revenue, respectively.

Revenue from one prime contractor under which the Company has multiple subcontracts represented 55.4 % of the Company’s revenue in aggregate.

During the year ended December 31, 2022, the Company’s prime contracts with U.S.

government agencies represented 25.1 % of revenue and subcontracts under federal procurements represented 71.3 % of revenue.

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

Three subcontracts under federal procurements represented 28.4 %, 17.2 % and 11.2 % of revenue, respectively.

Revenue from one prime contractor under which the Company has multiple subcontracts represented 43.6 % of the Company’s revenue in aggregate.

The Company sold third -party software and maintenance contracts under agreements with one major supplier in 2023 and 2022, accounting for 2.4 % and 24.3 % of total revenue, 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.

As of December 31, 2022, the Company’s accounts receivable included receivables from one prime contract and one subcontract under federal procurements that represented 26.5 % and 25.8 % of the Company’s outstanding accounts receivable, respectively.

Receivables from one prime contractor under which the Company has multiple subcontracts represented 39.2 % of the Company’s outstanding accounts receivable in aggregate.

Intangibles and Goodwill

The Company accounts for goodwill and other intangible assets in accordance with ASC Topic 350, Goodwill – Intangibles and Other (“ASC 350” ) and has concluded that it has one operating segment and one reporting unit for purposes of goodwill impairment testing.

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.

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.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures.

The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

All disclosure requirements under ASU 2023 - 07 are also required for public entities with a single reportable segment.

The ASU is effective for the Company’s Annual Report on Form 10 -K for the fiscal year ended December 31, 2024, and subsequent interim periods, with early adoption permitted.

The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures and expects that it will result in additional disclosures.

Sale and Deconsolidation of GMI and Discontinued Operations

On March 17, 2023, the Company entered into and closed a Stock Purchase Agreement with GMDC, a company newly formed by StealthPoint LLC ("StealthPoint"), a San Francisco based venture fund, under which the Company sold all of the shares of its subsidiary, Gray Matters, Inc.

In exchange for this sale, the Company received common shares of GMDC representing on a primary share basis, assuming the conversion of the Series A preferred stock referenced below, 24.9 % interest in the purchaser, cash consideration of $ 935,974 and contingent annual payments equal to five percent ( 5 %) of the purchaser’s GAAP based revenue through December 31, 2029 attributable to the purchaser’s blockchain-enabled digital supply chain management platform and associated technologies.

GMDC also paid the Company $ 133,148 for certain of GMI’s operating expenses for the period beginning March 1, 2023 through March 17, 2023.

The equity interest StealthPoint and other GMDC investors received was in the form of Series A non-participating convertible preferred stock having a one -times ( 1x ) liquidation preference and no cumulative dividends.

In addition, the Company and GMDC entered into a transition services agreement whereby the Company continued to provide certain administrative services for GMI.

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

The $ 65,000 prepayment was recognized as a reduction to selling, general and administrative expenses ratably over the three -month period ended June 30, 2023 after which time no further transition services were provided.

The total cash received at closing was $ 1,000,974 .

The Company also had the right to appoint a representative to GMDC’s board of directors and a right to co-invest in future GMDC preferred stock financing rounds.

The Company recognized a gain on the sale of GMI of $ 100,615 in 2023, which is included in net loss on discontinued operations in the condensed consolidated statement of operations.

We deconsolidated GMI immediately upon its sale.

GMDC was not a related party of the Company at the time of its purchase of GMI.

Subsequent to our deconsolidation of GMI, and until our sale of GMDC common stock on August 9, 2023, GMI and GMDC were related parties of the Company due to our equity interest in GMDC.

The components of the consideration received and the methods for determining their fair values as of March 17, 2023 were as follows:

Consideration

Description and Valuation Methodology

Cash at closing

Cash received at closing less estimated value of transition services to be provided.

Cash after closing

Actual cash operating expenses of GMI from March 1 through March 17, 2023 (prior to the transfer of GMI to GMDC).

GMDC common stock

Based on Series A preferred stock issuance to other GMDC investors for $ 3,000,000 in cash and application of an option pricing model backsolve method and a minority interest discount to estimate the fair value of the common shares of GMDC.

Contingent payments

Estimated by applying a discount rate of 40.8 % to the projected cash receipts expected over the 7 -year horizon.

Total consideration

The GMDC common stock was accounted for as an equity method investment from March 17, 2023, and through its sale on August 9, 2023.

During this period, a net loss of $ 245,525 in the equity investment was recorded.

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 .

The contingent consideration receivable of $ 682,000 was settled in cash for $ 1,000,000 and a gain of $ 318,000 was recognized in the third quarter of 2023.

The following table sets forth details of net earnings from discontinued operations for the years ended December 31, 2023 and 2022, which reflects the results of our former Blockchain SCM operating segment through the date our controlling financial interest in it was sold – March 17, 2023.

Cost of revenue

Excess of contract costs over revenue

Operating expenses -

Salaries and benefits

Intangibles amortization

Stock based compensation, before forfeitures

Forfeiture of stock options

Other operating expenses

Change in fair value of contingent consideration

Impairment of long-lived assets - 3,762,915

Goodwill impairment

Gain on disposal of business

Loss before income tax benefit

Income tax benefit

Net loss on discontinued operations

During the year ended December 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 2023.

The income tax benefit is at an effective rate different from the federal statutory rate due principally to the following:

Loss from discontinued operations before income tax benefit $

Income tax benefit at federal statutory rate 70,559

State income tax benefit, net of federal benefit -

Permanent Differences - ( 1,158,687

Net Operating Loss ("NOL") expirations ( 7,084

Other ( 47,203 ) ( 11,675 )

Change in federal valuation allowance ( 16,272

Income tax benefit

The following table presents the components of the assets of our discontinued operations that are classified as held for sale as of December 31, 2022.

As of December 31, 2023, GMI had been sold and its accounts deconsolidated from the condensed consolidated balance sheet.

Customer relationship intangible asset, net of amortization

Technology intangible asset, net of amortization

Capitalized software development costs

Total assets of discontinued operations

Revenue from Contracts with Customers

Revenue is recognized when all the following steps have been taken and criteria met for each contract:

Identification of the contract, or contracts, with a customer - A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and the parties are committed to perform and, (iii) it determines that collection of substantially all consideration to which the Company will be entitled in exchange for goods or services that will be transferred is probable based on the customer’s intent and ability to pay the promised consideration.

Identification of the performance obligations in the contract - Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

To the extent a contract includes multiple promised goods or services, the Company applies judgment to determine whether promised goods or services are capable of being distinct in the context of the contract.

If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

Determination of the transaction price - The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any.

The Company typically estimates the transaction price impact of discounts offered to the customers for early payments on receivables or rebates based on sales target achievements.

Constraints are applied when estimating variable considerations based on historical experience where applicable.

Allocation of the transaction price to the performance obligations in the contract - If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis.

The Company determines standalone selling price by considering available information such as historical selling prices of the performance obligation, geographic location, overall strategic pricing objective, market conditions and internally approved pricing guidelines related to the performance obligations.

Recognition of revenue when, or as, the Company satisfies performance obligations - The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below.

Revenue is recognized at or over the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

Nature of Products and Services

We generate revenue from the sales of information technology professional services, sales of third -party software licenses and implementation and training services, sales of third -party support and maintenance contracts based on those software products, and incentive payments received from third -party software suppliers for facilitating sales directly between that supplier and a customer introduced by the Company.

We sell through our direct relationships with end customers and under subcontractor arrangements.

Professional services are offered through several arrangements – through time and materials arrangements, fixed-price-per-unit arrangements, fixed-price arrangements, or combinations of these arrangements within individual contracts.

Revenue under time and materials arrangements is recognized over time in the period the hours are worked or the expenses are incurred, as control of the benefits of the work is deemed to have passed to the customer as the work is performed.

Revenue under fixed-price-per-unit arrangements is recognized at a point in time when delivery of units has occurred and units are accepted by the customer or are reasonably expected to be accepted.

Generally, revenue under fixed-price arrangements and mixed arrangements is recognized either over time or at a point in time based on the allocation of transaction pricing to each identified performance obligation as control of each is transferred to the customer.

For fixed-price arrangements under which documentary evidence of acceptance or receipt of deliverables is not present or withheld by the customer, the Company recognizes revenue when it has the right to invoice the customer.

For fixed-price arrangements for which the Company is paid a fixed fee to make itself available to support a customer, with no predetermined deliverables to which transaction prices can be estimated or allocated, revenue is recognized ratably over time.

Third-party software licenses are classified as enterprise server-based software licenses or desktop software licenses, and desktop licenses are further classified by the type of customer and whether the licenses are bulk licenses or individual licenses.

The Company’s obligations as the seller for each class differ based on its reseller agreements and whether its customers are government or non-government customers.

Revenue from enterprise server-based sales to either government or non-government customers is usually recognized in full at a point in time based on when the customer gains use of the full benefit of the licenses, after the licenses are implemented.

If the transaction prices of the performance obligations related to implementation and customer support for the individual contract is material, these obligations are recognized separately over time, as performed.

Revenue for desktop software licenses for government customers is usually recognized on a gross basis at a point in time, based on when the customer’s administrative contact gains training in and beneficial use of the administrative portal.

Revenue for bulk desktop software licenses for non-government customers is usually recognized on a gross basis at a point in time, based on when the customer’s administrative contact gains training in and beneficial use of the administrative portal.

For desktop software licenses sold on an individual license basis to non-government customers, where the Company has no obligation to the customer after the third -party makes delivery of the licenses, the Company has determined it is acting as an agent, and the Company recognizes revenue upon delivery of the licenses only for the net of the selling price and its contract costs.

Third-party support and maintenance contracts for enterprise server-based software include a performance obligation under the Company’s reseller agreements for it to be the first line of support (direct support) and second line of support (intermediary between customer and manufacturer) to the customer.

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.

Incentive payments are received under reseller agreements with software manufacturers and suppliers where the Company introduces and courts a customer, but the sale occurs directly between the customer and the supplier or between the customer and the manufacturer.

Since the transfer of control of the licenses cannot be measured from outside of these transactions, revenue is recognized when payment from the manufacturer or supplier is received.

Disaggregation of Revenue from Contracts with Customers

Year Ended December 31,

Contract Type

Services time & materials

$ 6,923,176 86.7 % $ 7,521,165 68.2 %

Services fixed price over time

414,682 5.2 % 407,611 3.7 %

Services combination

131,190 1.6 % 113,610 1.0 %

Services fixed price per unit

324,115 4.1 % 304,666 2.8 %

Third-party software

188,812 2.4 % 2,427,937 22.0 %

Software support & maintenance

- 0.0 % 142,891 1.3 %

Incentive payments

- 0.0 % 105,102 1.0 %

Total revenue

$ 7,981,975 100.0 % $ 11,022,982 100.0 %

Contract Balances

Contract Liabilities

Contract liabilities consist of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred.

Changes in contract liabilities balances in 2023 and 2022 are as follows:

Balance at December 31, 2021

Contract liabilities added

Revenue recognized

Balance at December 31, 2022

Contract liabilities added

Revenue recognized

Balance at December 31, 2023

Revenue recognized during 2023 from the balance as of December 31, 2022 was $ 159,307 and revenue recognized during 2022 from the balance as of December 31, 2021 was $ 160,809 .

Costs to Obtain or Fulfill a Contract

When applicable, the Company recognizes an asset related to the costs incurred to obtain a contract only if it expects to recover those costs and it would not have incurred those costs if the contract had not been obtained.

The Company recognizes an asset from the costs incurred to fulfill a contract if the costs (i) are specifically identifiable to a contract, (ii) enhance resources that will be used in satisfying performance obligations in future and (iii) are expected to be recovered.

There were no such assets as of December 31, 2023, and 2022.

When incurred, these costs are amortized ratably over the expected life of the customer.

Deferred Costs of Revenue

Deferred costs of revenue consist of the costs of third -party support and maintenance contracts for enterprise server-based software, as well direct costs associated with contract deliverables for which control of the work product has not passed to the customer and contract revenue has not been recognized.

These costs are reported under the prepaid expenses and other current assets caption on the Company’s consolidated balance sheets.

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.

Changes in deferred costs of revenue balances during 2023 and 2022 are as follows:

Balance at December 31, 2021

Deferred costs added

Deferred costs expensed

Balance at December 31, 2022

Deferred costs added

Deferred costs expensed

Balance at December 31, 2023

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

The leases both commenced in 2021 and have original lease terms ranging from 37 to 67 months and rental rates escalate by approximately 2.5 % annually under both leases.

The Company determines if an arrangement is a lease at inception.

Operating leases are included in right-of-use operating lease assets and operating lease liabilities in the Company’s consolidated balance sheets as of December 31, 2023 and 2022.

As of December 31, 2023 and 2022, the Company does not have any sales-type or direct financing leases.

The Company’s operating lease asset represents its right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

Since the lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The operating lease asset also includes any lease payments made and excludes lease incentives.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company’s lease agreement includes rental payments escalating annually for inflation at a fixed rate.

These payments are included in the initial measurement of the operating lease liability and operating lease asset.

The Company does not have any rental payments which are based on a change in an index or a rate that can be considered variable lease payments, which would be expensed as incurred.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictions or covenants.

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

As of December 31, 2023, our two operating leases had a weighted average remaining lease term of 25 months and a weighted average discount rate of 5.1 %.

Future lease payments under operating leases as of December 31, 2023 were as follows:

Total lease payments

Present value of lease liabilities

The total expense incurred related to its operating leases was $ 152,211 and $ 214,241 for the years ended December 31, 2023 and 2022, respectively, and is included in selling, general and administrative expenses on the consolidated statements of operations.

Accounts receivable as of December 31, 2023 and 2022, consist of the following:

December 31, 2023

December 31, 2022

Billed federal government

$ 1,110,001 $ 1,573,407

Billed commercial and local government

Unbilled receivables

Accounts receivable are recorded at net realizable value, which includes an allowance for expected credit losses.

The allowance for expected credit losses (“allowance for doubtful receivables”) is based on the Company’s assessment of collectability of customer accounts.

The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay.

Contingent liabilities

Certain conditions may exist as of the date the consolidated financial statements are issued, that may result in a loss to the Company but that will only be resolved when one or more future events occur or fail to occur.

Such losses are disclosed as contingent liabilities if it is not both probable and reasonably estimable.

The Company's management assesses such contingent liabilities and estimated legal fees, if any.

Such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

The Company accounts for the warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity” (“ASC 480” ) ASC 815, “Derivatives and Hedging” (“ASC 815” ), and ASC 718, “Compensation—Stock Compensation” (“ASC 718” ).

The assessment considers whether they are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480 or meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock and whether the holders of the warrants could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the warrants and as of each subsequent reporting date while the warrants are outstanding.

For issued or modified warrants and that meet all of the criteria for equity classification, such warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, such warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Changes in the estimated fair value of liability-classified warrants are recognized as a non-cash gain or loss on the statements of operations.

Derivative financial instruments

The Company evaluates its debt or other funding agreements to determine if those agreements or embedded components of those agreements qualify as derivatives to be separately accounted for in accordance with ASC 815 and ASC 480.

The result of this accounting treatment is that the fair value of the embedded derivative, if required to be bifurcated, is marked-to-market at each balance sheet date and recorded as a liability.

The fair value measurements are determined using models that maximize the use of observable market inputs.

The change in fair value is recorded in the accompanying consolidated statements of operations and comprehensive loss as a component of “Other income (expenses)”.

Stock options

The Company grants stock options to certain employees and directors through an established stock option plan.

All stock option grants or changes to existing grants, are subject to board of directors’ approval.

For employees and directors, the fair value of the award is measured on the grant date.

For non-employees, as per ASC 718, remeasurement is not required.

The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Determining the appropriate fair value model and the related assumptions requires judgment.

During the year ended December 31, 2024 and 2023, the fair value of each option grant was estimated using a Black-Scholes option-pricing model.

Shares issued for services

For fully vested, nonforfeitable equity instruments that are granted at the date the Company enters into an agreement for goods or services with a nonemployee, the Company’s recognizes the fair value of the equity instruments on the grant date.

The corresponding cost is recognized as an immediate expense or a prepaid asset and expensed over the service period depending on the specific facts and circumstances of the agreement with the nonemployee.

Revenue recognition

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

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

The Company performs the following five steps:

identify the contract(s) with a customer,

identify the performance obligations in the contract,

determine the transaction price,

allocate the transaction price to the performance obligations in the contract, and

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

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

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

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

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

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

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

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

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

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

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

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

Deferred revenue

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

The change in the deferred revenue balance for the years ended December 31, 2024, and 2023 was driven by payments from customers in advance of satisfying the performance obligations, offset by revenue recognized as performance obligations were completed.

Research and development expenses

Research and development expenses are expensed as incurred and consist primarily of personnel, facilities, equipment and supplies related to the Company’s research and development activities.

Software development costs

Software development costs incurred in creating computer software solutions are expensed until technological feasibility has been established upon completion of a detailed program design.

Thereafter, all software development costs incurred through the software's general release date are capitalized and subsequently recorded at the lower of amortized cost or net realizable value.

Any costs incurred during subsequent efforts to significantly upgrade and enhance the functionality of the software are also capitalized once technological feasibility for the respective upgrades and enhancements has been established.

Capitalized software costs are included in intangible assets, net on the consolidated balance sheets.

Amortization of software costs are recorded on a straight-line basis over their estimated useful life of five years and begin once the project is substantially complete and the software is ready for its intended purpose.

Unamortized capitalized costs of a computer software product are compared to the net realizable value of the product.

The amount by which the unamortized capitalized costs of a computer software product exceed the net realizable value of that asset is written off.

Equipment is measured at cost, including capitalized borrowing costs, less accumulated depreciation and impairment losses.

Ordinary repairs and maintenance are expensed as incurred.

The Company uses an estimated useful life of four years for medical equipment.

Income taxes are accounted for using the asset/liability method.

Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

In estimating future tax consequences, all expected future events are considered other than enactment of changes in the tax law or rates.

The Company adopted ASC 740 “Income Taxes” (“ASC 740” ), which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements.

Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

Employee benefits

Short-term employee benefits are benefits for which full settlement is expected within twelve months of the end of the financial year in which the members of staff rendered the corresponding services.

These benefits include, paid annual leave, paid sick leave, health and governmental social security contributions which are expensed as the services are rendered.

A liability for a cash bonus or plan profit-sharing is recognized when the Company has a legal or implied obligation to make such payments because of past services rendered by a member of staff, and it is possible to make a reasonable estimate of the amount.

For post-employment the Company has a defined contribution plan pursuant to section 14 to the Israeli Severance Compensation Act, 1963 under which the Company pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold enough to pay all employee benefits relating to employee service in the current and prior periods.

Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed monthly, concurrently with performance of the employee’s services.

Recent accounting policy adoption

Reportable Segments

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023 - 07, Improvements to Reportable Segment Disclosures.

ASU 2023 - 07 is intended to improve reportable segment disclosures primarily through enhanced disclosure of reportable segment expenses.

This ASU is effective for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted ASU 2023 - 07 in this Annual Report on Form 10 -K for the year ended December 31, 2024 on a retrospective basis and concluded that the application of this guidance did not have any material impact on consolidated financial statements.

Refer to Note 16 for related disclosures.

Recent accounting pronouncements

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

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

ASU 2023 - 09 is effective for annual periods beginning January 1, 2025, with early adoption permitted.

The Company has not adopted this standard early and is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements disclosures.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024 - 03, Disaggregation of Income Statement Expenses (“ASU 2024 - 03” ).

ASU 2024 - 03 is intended to improve the disclosure about certain operating expenses primarily through enhanced disclosure of cost of sales and selling, general and administrative expenses.

This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

ASU 2024 - 03 can be applied on either a prospective or a retrospective basis at the Company’s election.

The Company has not adopted this standard early and is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements disclosures.

Induced Conversions of Convertible Debt Instruments

In November 2024, the FASB issued Account Standards Update, or ASU, 2024 - 04 “Debt with Conversion and Other Options (Subtopic 470 - 20 ):

Induced Conversions of Convertible Debt Instruments,”, or ASU 2024 - 04.

ASU 2024 - 04 clarifies the accounting treatment for settlement of a convertible debt instrument as an induced conversion.

ASU 2024 - 04 is effective on a prospective basis, with the option for retrospective application, for fiscal years beginning after December 15, 2025.

The Company has not adopted this standard early and is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements disclosures.

On August 12, 2024, Private Firefly consummated the Merger.

The Merger was treated as a reverse recapitalization, whereby Private Firefly was deemed to be the accounting acquirer, and the historical financial statement of Private Firefly became the historical financial statement of WaveDancer (renamed Firefly Neuroscience, Inc.) upon the closing of the Merger.

Under this method of accounting, WaveDancer was treated as the acquiree and Private Firefly is treated as the acquirer for financial reporting purposes.

Accordingly, for accounting purposes, the Merger was treated as the equivalent of Private Firefly issuing stock for the net assets of WaveDancer, accompanied by a recapitalization.

The net assets of WaveDancer were stated at carrying values, with no goodwill or other intangible assets recorded.

The following table reconciles the elements of the Merger to the consolidated statements of changes in shareholders’ equity for the year ended December 31, 2024:

Recapitalization

Net working capital assumed from WaveDancer

Effect of the Merger, net of transaction costs

The net working capital assumed from WaveDancer included $ 137 related to a pre-existing relationship, which was settled upon the Merger.

The following table details the number of shares of common stock issued following the consummation of the Merger:

Shares of common stock owned by WaveDancer’s pre-Merger shareholders

Shares of common stock issued in exchange for Private Firefly shares of common stock

Total shares of common stock outstanding immediately after Merger

As of December 31, 2024, 55,784 shares of common stock owned by WaveDancer’s pre-Merger shareholders were in Company’s treasury.

In addition to the shares of common stock, WaveDancer’s shareholders retained:

113,522 employee stock options;

warrants exercisable for up to 76,098 shares of common stock of the combined entity.

As of December 31, 2024, all WaveDancer options expired.

The consolidated assets, liabilities, and results of operations prior to the Merger are those of Private Firefly.

The shares and corresponding capital amounts and losses per share, prior to the Merger, have been retroactively restated based on shares reflecting the Exchange Ratio of 0.1040 established in the Merger.

ACCOUNTS RECEIVABLE, NET

Details of accounts receivable balance is as follows:

Accounts receivable

$ 1,117,862 $ 1,629,559

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

Unbilled receivables include short-term contract assets where billing cycles differ from calendar months, or a monthly fixed billing amount does not reflect the revenue earned in a given month.

The accounts receivable balance as of December 31, 2021, was $ 1,664,862 .

Fair Value Measurements

The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1—Quoted prices in active markets for identical assets or liabilities;

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

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 represents the fair value hierarchy for the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2023 and 2022:

December 31, 2023

Cash equivalents:

Money market funds

$ 631,258 $ - $ - $ 631,258

December 31, 2022

Cash equivalents:

Money market funds

Allowance for doubtful receivables

( 112 ) ( 112 )

The following table reflects the change in fair value of our financial instruments measured at fair value on a recurring basis based on Level 3 inputs:

Fair value of contingent consideration:

December 31, 2021

Changes in Fair Value

December 31, 2022

Changes in Fair Value

PREPAID EXPENSES AND DEPOSITS

Detail of prepaid expenses and deposits balance is as follows:

Shares issued for prepaid services

Prepaid expenses and deposits

Total (current)

Shares issued for prepaid services

Prepaid expenses and deposits

Total (non-current)

The Company entered into four standalone strategic investment agreements.

Pursuant to these agreements, the Company agreed to issue 433,360 of shares of common stock in exchange for $ 2,925 of service credits that are to be consumed in future.

Refer Note 12.a for further details.

Included in the non-current prepaid expenses and deposits is a $ 300 deferred financing cost related to the equity line of credit (Note 11 ).

EQUIPMENT, NET

Equipment balance is as follows:

Medical equipment, cost

Less – accumulated depreciation

Equipment, net

Depreciation expense was $ 12 and $nil for the years ended December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024, the Company disposed of office equipment for $ 12 and recognized $ 12 loss on disposition of assets within “Other income (expenses).”

INTANGIBLE ASSETS, NET

The following tables summarize the composition of intangible assets as of December 31, 2024:

December 31, 2024

Money market funds are highly liquid investments and are included in cash and cash equivalents on the consolidated balance sheets.

The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date.

This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

See Note 2 for a discussion of the fair value of contingent consideration.

The carrying amounts of financial instruments such as accounts receivable and accounts payable approximate the related fair value due to the short-term maturities of these instruments.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

There were no gains or losses on assets measured at fair value on a nonrecurring basis in 2023.

The following table is a summary of losses on assets measured at fair value on a nonrecurring basis in 2022, which are included in loss from discontinued operations on the consolidated statement of operations:

Impairment of long-lived assets

Intangible assets

Right of use assets

Impairment of goodwill

During the third quarter of 2022, our Gray Matters reporting unit, which was the same as our former Blockchain SCM operating segment, experienced delays in receiving approval from its government customer of certain milestone achievements specified in our contract with that customer.

This delay, in turn, resulted in a decline in the reporting unit’s estimated future cash flows.

Accordingly, we performed an interim goodwill impairment test as of September 30, 2022, prior to our annual impairment test and the estimated fair value of the Gray Matters reporting unit was determined to be lower than its carrying value.

In the third quarter of 2022, we recorded a non-cash pre-tax and after-tax charge of $ 2,254,624 to impair the carrying value of this reporting unit’s goodwill.

For our third quarter 2022 interim goodwill impairment testing, the fair value of the reporting unit was determined using an income approach based on a discounted cash flow (“DCF”) model which requires a complex series of judgments about future events and uncertainties and relies heavily on estimates of expected cash flows, an appropriate discount rate, and a terminal growth rate.

Any changes in key assumptions, including failure to grow the revenue and improve the profitability of GMI, or other unanticipated events and circumstances, may affect such estimates.

Fair value assessments of the reporting unit are considered a Level 3 measurement due to the significance of unobservable inputs developed using company specific information.

The discount rate and terminal growth rate used in our 2022 third quarter interim impairment test for the Gray Matters reporting unit were 22.5 % and 3.0 %, respectively.

On January 18, 2023 we executed a non-binding letter of intent to sell of the shares of GMI to an affiliate of the venture capital firm StealthPoint LLC (“SP”).

While the Company continued to believe in the long-term commercial viability of its Blockchain SCM product, we also believed that GMI would continue to incur losses for a longer period than was originally estimated and would require additional cash investment before it could generate positive cash flow.

As of December 31, 2022, we determined that the ongoing discussions with SP and negotiations of potential value of our Gray Matters reporting unit were considered trigger events for purposes of evaluating the recoverability of that reporting unit and its associated goodwill.

The components of the consideration and methods for valuing them to determine the fair value of the Gray Matters reporting unit were as follows:

Consideration

Description and Valuation Methodology

Cash at closing

$ 935,974 Cash received at closing less estimated value of transition services to be provided.

Cash after closing

133,148 Actual cash operating expenses of GMI from March 1 through March 17, 2023 (prior to the transfer of GMI to GMDC).

GMDC common stock

581,000 Based on Series A preferred stock issuance to other GMDC investors for $ 3,000,000 in cash and application of an option pricing model backsolve method and a minority interest discount to estimate the fair value of the common shares of GMDC.

Contingent payments

682,000 Estimated by applying a discount rate of 40.8% to the projected cash receipts expected over the 7 -year horizon.

(See Note 5).

Total consideration

As a result of the December 31, 2022 impairment testing of the GMI reporting unit, we recorded a non-cash pre-tax charge for impairment of definite lived intangible assets of $ 3,649,193 , which resulted in a deferred tax benefit of $ 910,147 and a non-cash pre-tax and after-tax charge of $ 4,205,544 to impair the remaining balance of goodwill, bringing the total goodwill impairment to $ 6,460,168 for 2022.

We also recorded a non-cash pre-tax impairment charge of right of use assets of $ 113,722 which resulted in a deferred tax benefit of $ 16,116 .

The Company consummated the transaction with StealthPoint on March 17, 2023, and immediately deconsolidated GMI.

Property and Equipment

Property and equipment consist of the following as of December 31:

Computer equipment and purchased software

$ 365,874 $ 365,874

Furniture and equipment

117,307 117,307

Leasehold improvements

Property and equipment, gross

490,619 490,619

Accumulated depreciation

Property and equipment, net

$ 57,999 $ 98,991

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2023 and 2022, totaled $ 40,992 and $ 43,742 , respectively.

Intangible Assets

The following table summarizes our intangible assets as of December 31, 2023 and 2022 and the changes during 2023:

Weighted Average Useful Life (Years)

Balance December 31, 2022

Balance December 31, 2023

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

( 308,217 ) ( 176,244 ) ( 484,461 )

901,783 ( 176,244 ) 725,539

Intangible assets with indefinite lives

280,000 - 280,000

Net identifiable intangible assets

$ 1,181,783 $ ( 176,244 ) $ 1,005,539

As of December 31, 2023, expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter is as follows:

Settlement of Litigation

On April 28, 2023, the Company and Jeffrey Gerald, the individual from whom the WaveDancer purchased all the outstanding shares of GMI, executed an agreement to settle pending litigation between them (the “Settlement Agreement”).

On January 25, 2023, Gerald, as the result of the termination of his employment, filed a lawsuit against the Company for one year’s severance of $ 150,000 and benefits to which he claimed he was entitled under his employment agreement with the Company.

He had also claimed an anticipatory breach of the payment of $ 1,500,000 of deferred consideration otherwise due him on December 10, 2023, under the Stock Purchase Agreement between him and the Company and an anticipatory breach to release from escrow 43,648 shares of the Company’s common stock which are held in escrow for application against potential indemnity claims under the Stock Purchase Agreement.

The Company filed an answer denying Gerald’s claims.

In addition, the Company filed a counterclaim seeking damages from Gerald associated with the acquisition transaction and arising under the Stock Purchase Agreement.

The principal terms of the Settlement Agreement were:

All amounts due to Gerald related to the GMI acquisition, including the $ 1,500,000 of deferred consideration, were deemed satisfied and such obligations were extinguished;

The Company removed restrictions from 43,648 shares of the Company’s common stock;

The Company paid Gerald $ 25,000 as reimbursement for legal costs;

Gerald and the Company agreed to mutual general releases of one another.

As a result of the settlement, the Company recognized a gain, net of expenses, of $ 1,442,468 .

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.

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

The line of credit initially expired on May 16, 2023, after which Summit made several extensions of the expiration date, with the most recent extension being made to May 16, 2024.

In connection with an extension of the expiration date of the line of credit, the maximum amount of borrowings permitted under the line was reduced to $ 500,000 .

As of December 31, 2023 and 2022, there was $ 500,000 and $ 425,000 outstanding, respectively, and $ 0 and $ 575,000 of borrowing availability, respectively.

The interest rate in effect as of December 31, 2023, was 8.5 %.

As of December 31, 2023, 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.

Income tax (benefit) expense for the years ended December 31, 2023 and 2022 consists of the following:

Current income tax (benefit) expense

$ ( 3,101 ) $ 2,533

State & Local

Deferred income tax (benefit) expense

( 25,650 ) 795,001

State & Local

( 17,284 ) 7,357

( 42,934 ) 802,358

Income tax (benefit) expense

$ ( 42,585 ) $ 812,457

The income tax (benefit) expense is at an effective rate different from the federal statutory rate due principally to the following:

Loss from continuing operations before taxes

$ ( 1,741,027 ) $ ( 5,493,471 )

Income tax benefit at federal statutory rate

$ ( 365,616 ) $ ( 1,153,629 )

State income tax benefit, net of federal benefit

( 247,516 ) 13,334

Permanent Differences

( 1,782,519 ) 155,260

Net Operating Loss ("NOL") expirations

28,617 12,431

31,234 ( 174,566 )

Change in federal valuation allowance

Accumulated Impairment Net

Finite lived intangible assets

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

Income tax (benefit) expense

Total intangible assets

$ 1,109 $ ( 55 ) $ (874 ) $ 180

Deferred Income Taxes

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets and liabilities were as follows:

Deferred tax assets:

Net operating losses

fourth quarter of

2024, management performed the assessment and determined that

one of the capitalized upgrades was

no longer expected to be utilized.

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

The estimated aggregate future amortization expense for intangible assets subject to amortization as of

December 31, 2024, is summarized below:

Year ending December 31 Estimated Future Amortization Expense

CONVERTIBLE PROMISSORY NOTE

Convertible Promissory Note

On December 20, 2024, the Company issued a convertible promissory note of $ 2,400 and warrants to purchase up to 800,000 shares of common stock at an exercise price of $ 4.00 per share (“Convertible Promissory Note Warrants”) (Note 12.b ).

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

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

If the Company fails to secure $ 5,000 in financing within five months, the conversion price adjusts to 90 % of the lowest daily VWAP during the five trading days before the conversion notice, with a minimum floor price of $ 0.48 per share.

In the event of default, the conversion price adjusts to the lesser of (i) the then applicable conversion price and (ii) 85 % of the lowest daily VWAP during the ten trading days before the conversion notice.

If the Company enters into an agreement for a change of control, the holder of the convertible promissory note has the right to require prepayment of an amount equal to 115 % of the outstanding principal amount (“Change of Control Prepayment Option”).

The principal amount of $ 2,400 will mature and become due and payable on December 20, 2025.

Each Convertible Promissory Note Warrant entitles the holder to acquire

one share of common stock at an exercise price of

$ 4.00 per share for a period of

five years from the date of issuance.

The warrants were determined to be a freestanding equity instrument.

The Company bifurcated the Conversion Option and accounted for it as a derivative liability due to the conversion feature not being clearly and closely related to the economic characteristics of the host contract.

The inputs used to determine the fair value of the Conversion Option were a share price of

$ 2.33 , exercise price of

$ 3.00 , expected term of

one year, annualized volatility of

110.71 %, and a risk-free rate of

Any changes in the fair value of the Conversion Option are recognized in “Change in derivatives fair value” in the Company’s consolidated statement of operations.

For the year ended

December 31, 2024, there were

$ 157 of fair value changes related to the Conversion Option recorded on the consolidated statements of operations.

The Company incurred

$ 85 of costs associated with the issuance of the convertible promissory note.

Issuance costs were proportionally allocated to the components of the convertible promissory note.

$ 16 of issuance costs allocated to embedded derivatives were expensed in “Other income (expenses)” in the Company’s consolidated statement of operations.

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

Balance at December 31, 2023

Convertible promissory note proceeds, net of transaction costs

Allocation to warrants, net of transaction costs

Allocation to Conversion Option, at fair value including transaction costs

Interest and accretion

Balance at December 31, 2024

LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT

Israeli labor law requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain circumstances.

Pursuant to Section 14 of the Israeli Severance Compensation Act, 1963, all the Company’s employees located in Israel are entitled to monthly deposits, at a rate of 8.33 % of their monthly salary, made in their name with insurance companies.

Payments made in accordance with Section 14 relieve the Company from any future severance payments in respect of those employees.

In accordance with the Israeli Severance Compensation Act, payments for 2024 and 2023 were $ 45 and $ 33 , respectively, which are included in salary and employee benefits within research and development expenses.

COMMITMENTS AND CONTINGENCIES

Royalty Commitment - Israeli Innovation Authority ( “ IIA ” )

The Company is committed to pay royalties to the State of Israel, through the IIA, on proceeds from sales of products which the IIA participated by way of grants for research and development.

No grants were received in 2024 or 2023.

Under the terms of the prior IIA grant agreements, the principal value of financial assistance received along with annual interest based on London Inter-Bank Offered Rate (“LIBOR”) is repayable in form of royalties based on 3.0 % of BNA™ sales.

Since the elimination of LIBOR, the Secured Overnight Financing Rate (“SOFR”) subsequently replaced LIBOR as a reference rate of interest for IIA grant agreements.

In the case of lack of commercial feasibility of the project that was financed using the grant, the Company is not obligated to pay any royalty.

The Company cannot reasonably determine the outcome of the commercialization of the technology and considers the liability to be contingent upon generation of sales, hence no liability has been recognized as of December 31, 2024 and 2023.

The contingent liability amounts to $ 5,833 and $ 5,625 for 2024 and 2023, respectively.

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

Equity Line of Credit

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

Securities and Exchange Commission (“SEC”).

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

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

In connection with the Purchase Agreement, the Company has committed to pay a $ 300 commitment fee.

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

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

As of December 31, 2024, the Company did not issue any shares pursuant to the Purchase Agreement.

On February 16, 2023, the Company sold 3,383,784 shares of common stock at a price per share of $ 0.0041 .

The Company received aggregate gross proceeds from the offering of $ 133 .

On February 23, 2023, the Company offered up to 1,123,110 shares of Series B Preferred Stock (the “Series B Preferred Stock”) at $ 1.78 per share.

On March 15, 2023, the Company increased the offering to up to 1,516,199 shares of Series B Preferred Stock, with the increase being subsequently approved by the board of directors on November 15, 2023.

As of December 31, 2023, the Company received aggregate gross proceeds from the offering of $ 2,700 .

The Company incurred $ 92 of costs associated with the issuance.

Series B Preferred Stock issued are equity classified instruments and are recorded as equity.

As of December 31, 2023, 1,516,199 Series B Preferred Stock were subscribed and issued.

As of December 31, 2023, the mandatory conversion feature of the Series B Preferred Stock was triggered, as the proceeds from the Series C Offering exceeded $ 1,000 .

As per the terms of Series B Preferred Stock, all preferred shares were converted into one share of common stock.

During the year ended December 31, 2024, 1,516,199 of shares of Series B Preferred Stock converted into 1,516,199 shares of common stock.

On May 1, 2023, the Company granted 29,636 shares of common stock to a related party as a payment for consulting services provided.

The shares awarded are under the scope of ASC 718 and were accounted for as equity-classified awards.

The shares were measured at fair value on the grant date at $ 0.0394 per share.

On August 29, 2023, the Company offered up to 812,500 units (the “Series C Units”), with each Series C Unit consisting of one share of Series C Preferred Stock (the “Series C Preferred Stock”) and one warrant to purchase one share of common stock (the “Series C warrants”), at a combined purchase price of $ 12.31 per Series C Unit (the “Series C Offering”).

On October 16, 2023, 355 shares of common stock were repurchased for a nominal amount and cancelled by the Company.

During the year ended December 31, 2023, the Company issued 159,966 Series C Units and received aggregate gross proceeds of $ 1,969 .

The Company incurred $ 67 of costs associated with the issuance.

During the year ended December 31, 2024, the Company issued 86,953 Series C Units and received aggregate gross proceeds of $ 1,070 .

The Company incurred $ 125 of costs associated with the issuance and issued broker warrants to purchase up to 4,163 shares of common stock to the associated broker in connection with the Series C Offering.

The shares of Series C Preferred Stock issued are equity classified instruments and are recorded as equity.

Each Series C Warrant entitles the purchasers to acquire one share of common stock at an exercise price of $ 24.62 per share for a period of three years from the date of issuance (Note 12.b ).

The conversion price of the Series C Preferred Stock was amended contemporaneously with the consummation of the Merger.

As of August 12, 2024, the mandatory conversion feature of the Series C Preferred Stock was triggered upon the consummation of the Merger.

Pursuant to the terms of Series C Preferred Stock, all issued and outstanding shares of the Series C Preferred Stock converted into 596,145 shares of common stock upon consummation of the Merger.

On July 26, 2024, the Company entered into a private placement transaction (the “PIPE”), pursuant to which the Company agreed to issue and sell (i) 319,207 shares of common stock and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 504,324 shares of common stock, and (iii) warrants (the “PIPE Warrants”) to purchase up to 823,529 shares of common stock (as adjusted for the Exchange Ratio).

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

The PIPE closed on August 12, 2024, contemporaneously with the consummation of the Merger.

The aggregate gross proceeds from the PIPE were approximately $ 3,500 .

The Company incurred $ 137 of costs associated with the issuance.

On July 27, 2024, the Company entered into four standalone strategic investment agreements.

One of the service providers is owned by a director of the Company (Note 14 ).

Pursuant to the strategic investment agreements, the Company agreed to issue 433,360 of shares of common stock.

The shares are fully vested upon issuance and have been valued at $ 2,440 .

These shares were subject to regulatory lock-up restrictions.

Of these shares, 140,749 are subject to a 12 -month lock-up restriction and 292,611 shares are subject to a 6 -month lock-up restriction.

The restriction is a characteristic of the security and, therefore, is considered in the fair value measurements.

The shares were measured at fair value, considering the effect of the post-vesting restrictions via accounting for discount for lack of marketability (“DLOM”), determined using the Finnerty model.

The shares were issued on August 12, 2024, contemporaneously with the consummation of the Merger.

Pursuant to the terms of the strategic investment agreements, the service providers granted the Company $ 2,925 of service credits to perform business consulting and software development services that are to be consumed in future.

Service credits were recognized as prepaid expenses in accordance with ASC 718 (Note 6 ).

On August 12, 2024, the Company issued 45,344 shares of common stock with the intention to settle accrued liabilities.

As the Company did not reach a contractual agreement to settle the outstanding amount, the Company recognized a note receivable as contra-equity in return for shares of common stock issued.

On August 12, 2024, pursuant to the terms of the restricted share units (the “RSUs”), all issued and outstanding RSUs of the Company vested and the Company issued 59,264 shares of common stock and recognized $ 410 of share-based compensation expense (Note 12.g ).

In August 2024, the Company issued 802,142 shares of common stock to WaveDancer’s pre-Merger shareholders (Note 4 ).

During the year ended December 31, 2024, certain warrant holders exercised their warrants to purchase 638,919 shares of common stock for proceeds of $ 36 for the Company.

The following table summarizes the Company’s warrant activity:

Outstanding warrants, January 1, 2023

33,467 $ 45.43 2.54

Capital loss carryforward

Stock-based compensation

Series C Warrants (Note 12.a)

159,966 24.62

Transaction costs

Accrued vacations

Outstanding warrants, December 31, 2023

193,433 $ 23.46 2.74

Accrued commissions

Series C Warrants (Note 12.a)

Broker warrants for Series C Offering (Note 12.a)

PIPE Warrants (Note 12.a)

WaveDancer legacy warrants (Note 4)

Convertible Promissory Note Warrants (Note 9)

( 12,827 ) 0.05

Deferred tax assets before valuation allowance

Outstanding warrants, December 31, 2024

1,971,216 $ 11.54 4.30

Valuation allowance

Warrants exercisable for little or no consideration

Warrants exercisable for little or no consideration are fully vested warrants that allows the holders to acquire a specified number of the issuer’s shares at a nominal exercise price.

The following table summarizes the Company’s penny warrant activity for the year ended December 31, 2024:

Number of Warrants

Weighted Average

Remaining Life

Outstanding warrants, January 1, 2023

Outstanding warrants, December 31, 2023

Pre-funded warrants (Note 12.a)

Series D warrants

Series A warrants

Consulting agreement warrants

Outstanding warrants, December 31, 2024

On June 15, 2023, the Company granted Series A warrants to purchase up to an aggregate 629,047 shares of common stock to certain investors at a nominal exercise price for a period of five years from the issuance date.

The exercisability of the Series A warrants was contingent upon meeting certain market capitalization or occurrence of a liquidity event.

Upon the consummation of the Merger on August 12, 2024, the Series A warrants became fully vested.

The Series A warrants were determined to be an equity instrument.

The Company determined the fair value of the Series A warrants to be nominal based on the stock price established at grant date.

On June 7, 2024, the Company issued Series D warrants to purchase up to an aggregate 92,799 shares of common stock to certain investors at a nominal exercise price for a period of five years from the issuance date.

The exercisability of the Series D warrants was contingent upon meeting certain market capitalization or the occurrence of a liquidity event.

Upon the consummation of the Merger on August 12, 2024, the Series D warrants became fully vested.

The Series D warrants were determined to be an equity instrument.

The Company determined the fair value of the Series D warrants of $ 610 based on a stock price established on the grant date.

Employees stock option plan

In 2010, the Company’s board of directors approved an employee and service provider’s stock option plan.

On July 8, 2023, the board of directors approved new equity incentive plan (the “Plan”).

The Plan permits the grant of options, share appreciation rights (“SARs”), restricted share units (“RSUs”), deferred share units (“DSUs”) and performance share units (“PSUs”).

In respect of options, the aggregate number of shares of common stock issuable under the Plan shall not exceed twelve percent of the issued and outstanding shares of common stock at any point in time.

In respect of SARs, RSUs, DSUs and PSUs:

(i) the maximum aggregate number of shares of common stock issuable under this Plan in respect of SARs, RSUs, DSUs and PSUs shall not exceed ten percent of the issued and outstanding shares of common stock as of July 8, 2023;

( ii) the total number of SARs, RSUs, DSUs and PSUs issuable to any participant under this Plan shall not exceed one percent of the issued and outstanding shares of common stock at the time of the award.

A summary of option activity under the Plan as of December 31, 2024, and changes during the year then ended is presented below.

Stock Options

Outstanding Options, December 31, 2023

134,333 $ 20.77 6.18 $ -

Net deferred tax assets

Options granted

WaveDancer options

113,522 82.25

Deferred tax liabilities:

Intangible Assets

Options expired

( 113,522 ) 82.25

Net deferred tax liabilities

Outstanding Options, December 31, 2024

470,061 $ 9.64 3.97 $ -

The Company has net operating loss carryforwards of approximately $ 15.4 million, of which $ 1.2 million will expire, if unused, between the years 2024 and 2037.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

The Company has analyzed its income tax positions using the criteria required by U.S.

GAAP and concluded that, as of December 31, 2023 and 2022, it has no material uncertain tax positions and no interest and penalties have been accrued.

The Company has elected to recognize any estimated penalties and interest on its income tax liabilities as a component of its provision for income taxes.

Our income tax returns are subject to examination by income taxing authorities in all jurisdictions for which we file tax returns, generally for three years after each return was filed, but extending to years from which net operating loss carryforwards are utilized to reduce current year taxes.

We are not currently under audit in any jurisdiction.

401 (k) Plans

We have two 401 (k) Savings Plans that qualify as deferred salary arrangements under Section 401 (k) of the Internal Revenue Code.

Under these 401 (k) Plans, matching contributions are based upon the amount of the employees’ contributions subject to certain limitations.

We recognized expense of $ 125,394 and $ 163,642 for the years ended December 31, 2023 and 2022, respectively, which is included in cost of professional fees and selling, general and administrative expenses on the consolidated statements of operations.

Stock-Based Compensation

We have three stock-based compensation plans.

The 2006 Stock Incentive Plan was adopted in 2006 ( “2006 Plan”) and had options granted under it through April 12, 2016.

The 2016 Stock Incentive Plan ( “2016 Plan”) was adopted in 2016 ( “2016 Plan”) and had options granted under it through November 15, 2021.

On October 11, 2021, the Board of Directors approved the 2021 Stock Incentive Plan ( “2021 Plan”) and on December 2, 2021, our shareholders approved the plan.

The Company recognizes compensation costs for those shares expected to vest on a straight-line basis over the requisite service period of the awards.

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

The share-based compensation expense related to options for December 31, 2024 and 2023 was $ 1,574 and $ 295 , respectively.

The fair value of options granted for the year ended December 31, 2024 and 2023 was $ 1,600 and $nil, respectively.

The intrinsic value of the options outstanding as of December 31, 2024 and 2023 was $nil .

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

Risk free rate

3.75 % - 3.82 % 4.35 %

Dividend yield

Expected term (years)

3.25 - 3.50 3.25 - 6.00

Expected volatility

86.50 % - 87.60 % 86 %

Determining the assumptions for the expected term and volatility requires management to exercise significant judgment.

The expected term represents the weighted-average period that options granted are expected to be outstanding giving consideration to vesting schedules.

Since the Company does not have an extended history of actual exercises, the Company has estimated the expected term using a simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards.

Given the limited public market for the Company’s stock, the Company has elected to estimate its expected volatility by benchmarking its volatility to that of several public company issuers that operate within its market segment.

The guideline companies’ volatility was increased by a size adjustment premium to compensate for the difference in size between the guideline companies and the Company in its calculation.

2021 Stock Incentive Plan

The 2021 Plan became effective October 11, 2021 and expires October 11, 2031.

The 2021 Plan provides for the granting of equity awards to key employees, including officers and directors.

The maximum number of shares for which equity awards may be granted under the 2021 Plan is 500,000 .

Options under the 2021 Plan expire no later than ten years from the date of grant or after prescribed periods of time after employment ceases, whichever comes first, and vest over periods determined by the Board of Directors.

The minimum exercise price of each option is the fair market value of the Company’s stock on the date of grant.

Under the Plan, fair market value means the average of the reported high and low sale prices of our common stock on the Nasdaq Stock Market.

As of December 31, 2023 and 2022, there were 330,700 and 350,700 , respectively, of outstanding unexpired options issued under the 2021 Plan, of which 169,520 and 129,500 , respectively, were exercisable, and there were 60,800 and 145,800 , respectively, options available to be granted.

2016 Stock Incentive Plan

The 2016 Plan became effective June 1, 2016, and expires April 4, 2026.

The 2016 Plan provides for the granting of equity awards to key employees, including officers and directors.

The maximum number of shares for which equity awards may be granted under the 2016 Plan is 1,000,000 .

Options under the 2016 Plan expire no later than ten years from the date of grant or after prescribed periods of time after employment ceases, whichever comes first, and vest over periods determined by the Board of Directors.

The minimum exercise price of each option is the quoted market price of the Company’s stock on the date of the grant.

As of December 31, 2023 and 2022, there were 53,100 and 77,350 options, respectively, of outstanding unexpired options under the 2016 Plan, of which 47,850 and 62,975 were exercisable, respectively.

No additional options may be granted under the 2016 Plan.

2006 Stock Incentive Plan

The 2006 Plan became effective May 18, 2006, and expired April 12, 2016.

The 2006 Plan provides for the granting of equity awards to key employees, including officers and directors.

The maximum number of shares for which equity awards could be granted under the 2006 Plan was 195,000 .

There were 7,200 and 27,200 outstanding unexpired options remaining from the 2006 Plan as of December 31, 2023 and 2022, respectively, all of which were exercisable.

The status of the options issued under the foregoing option plans as of December 31, 2023 and 2022, and changes during the years then ended were as follows:

Weighted average exercise price per share

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

Outstanding at December 31, 2021

290,450 $ 31.70 4 years, 11 months

Options granted

195,200 28.15

Options exercised

Expected term (in years)

3.91 - 4.93 3

Options expired

Options forfeited

A summary of the Company’s non-vested options as of December 31, 2024, and changes during the year ended December 31, 2024, is presented below.

Non-Vested Options, December 31, 2023

90,988 $ 4.77

Outstanding at December 31, 2022

455,250 $ 32.05 6 years, 5 months

Options granted

Options exercised

( 2,000 ) 3.70

Options expired

( 59,750 ) 23.53

Options forfeited

( 87,500 ) 30.11

Outstanding at December 31, 2023

391,000 $ 27.43 5 years, 4 months

Exercisable at December 31, 2023

224,570 $ 36.61 4 years, 6 months

The total intrinsic value of options exercised in the years ended December 31, 2023 and 2022 was $ 610 and $ 756,888 , respectively.

Nonvested stock option awards as of December 31, 2023 and 2022, and changes during the years then ended were as follows:

Weighted average exercise price per share

Weighted average grant date fair value

Nonvested at December 31, 2021

95,250 $ 40.70 $ 15.10

195,200 28.15 13.65

Options vested

( 220,289 ) 4.97

Non-Vested Options, December 31, 2024

206,427 $ 4.56

Nonvested at December 31, 2022

As of December 31, 2024, there was $ 461 of total unrecognized compensation cost related to nonvested options granted under the Plan.

Management options 2024

On April 2, 2024, the Company issued stock options to its officers to purchase up to an aggregate of 19,344 shares of common stock at an exercise price of $ 5.18 with a term of five years, where the exercise price is equal to a 25 % discount to the issue price of Private Firefly’s equity securities in an initial public offering (an “IPO Transaction”), that results in the Company’s shares of common stock being listed on the Nasdaq Stock Market or another recognized securities exchange or traded on the over-the-counter market.

Options to purchase up to 11,024 shares of common stock shall vest in 36 equal installments at the end of each calendar month over a period of three years beginning March 1, 2024.

Options to purchase up to 8,320 shares of common stock shall vest in 36 equal installments at the end of each calendar month over a period of Three years beginning on the date of the Merger.

The vesting of management options was contingent upon the occurrence of a liquidity event.

Upon the consummation of the Merger on August 12, 2024, the options were considered granted in accordance with ASC 718.

The exercise price was determined to be $ 5.18 per share.

The Company determined the fair value of the options of $ 99 using the Black-Scholes pricing model.

The Company used graded-vesting method for the recognition of share-based compensation related to these management options.

Management options 2023

On July 8, 2023, the Company issued stock options to its employees, officers, directors and consultants to purchase up to an aggregate of 327,421 shares of common stock at an exercise price of $ 5.18 with a term of five years, where the exercise price is equal to a 25 % discount to the issue price of the Company's equity securities in an initial public offering, that results in the Company’s shares of common stock being listed on the Nasdaq Stock Market or another recognized securities exchange or traded on the over-the-counter market.

Options to purchase up to 37,709 shares of common stock shall vest immediately with the remaining options vesting in 36 equal installments at the end of each calendar month over a period of three years from July 8, 2023.

The vesting of management options was contingent upon the occurrence of a liquidity event.

Upon the consummation of the Merger on August 12, 2024, the options were considered granted in accordance with ASC 718.

The exercise price was determined to be $ 5.18 per share.

11,037 options were forfeited before the Merger.

The Company determined the fair value of the options of $ 1,501 using the Black-Scholes pricing model.

The Company used graded-vesting method for the recognition of share-based compensation related to management options.

Restricted share units ( “ RSUs ” )

On July 8, 2023, the Company granted RSUs to certain management and directors.

The vesting of the RSUs was contingent upon a liquidity event that results in the Company’s shares of common stock being listed on the Nasdaq Stock Market or another recognized securities exchange or traded on the over-the-counter market.

Upon the consummation of the Merger on August 12, 2024, RSUs vested and the Company issued 59,264 shares of common stock and recognized $ 410 of share-based compensation expense.

The following table presents share-based compensation expense by instrument type:

Employees stock options

$ 1,574 $ 295

Restricted share units

Series D warrants

$ 2,594 $ 295

BASIC AND DILUTED NET LOSS PER SHARE

Basic net loss per common share is computed by dividing net loss attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the period.

Weighted average number of shares of common stock outstanding during the period computation includes shares of common stock to be contractually issued as of the year end date and warrants exercisable for little or no consideration in relation to the share price.

Shares of common stock that were issued and are subject to vesting conditions are not considered outstanding during the requisite service period.

The determination of whether shares of common stock that were issued in return for a note receivable are considered outstanding depends on whether the entity has the ability and intent to cancel the shares if the note receivable is not repaid.

Diluted net loss per common share is computed by giving effect to all potential dilutive shares of common stock that were outstanding during the period when the effect is dilutive.

As at December 31, 2024, potential dilutive shares of common stock consist of shares issuable upon exercise of stock options, warrants and conversion of convertible promissory note.

No adjustments have been made to the weighted average outstanding shares of common stock figures for the year ended December 31, 2024, or 2023, as the assumed conversion would be anti-dilutive.

RELATED PARTY TRANSACTIONS

On May 1, 2023, the Company issued 29,636 shares of common stock to a related party as a payment for consulting services provided.

On July 8, 2023, the Company granted options to its employees, officers, directors and consultants to purchase an aggregate of 327,421 shares of common stock in the capital of the Company (Note 12.e ), 288,794 of these options were granted to related parties.

30,933 of Series D warrants were granted to a company wholly owned by one of the Company’s directors.

The fair value of the warrants was $ 203 .

On September 19, 2024, the director exercised the warrants to purchase 30,933 shares of common stock.

On July 27, 2024, the Company entered into a strategic investment agreement with a company wholly owned by one of the Company’s directors.

Pursuant to agreement, the Company agreed to issue 140,749 shares of common stock.

The shares were issued on August 12, 2024.

The shares were fully vested upon issuance and were valued at $ 745 .

Pursuant to the terms of the agreement, the Company was issued $ 950 of service credits that are to be consumed in future.

As of the year ended December 31, 2024, $nil of related prepaid expenses were outstanding.

On August 8, 2024, the Company completed the closing of a $ 209 secured promissory notes with its related parties.

The promissory notes were issued with a discount of $ 11 and the Company received gross proceeds of $ 198 .

The promissory notes had an annual interest rate of 18 % to be paid monthly.

The principal amount of $ 209 matured and become due and payable on August 23, 2024.

Promissory notes were paid in full on the maturity date.

On August 12, 2024, all issued and outstanding RSUs vested and the Company issued 59,264 shares of common stock to related parties and recognized $ 410 of share-based compensation expense (Note 12.g ).

Type of goods and services

Other miscellaneous products

Timing of recognition of revenue

Point in time

SEGMENT REPORTING

The Company has one reportable segment managed on a consolidated basis:

BNA platform.

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

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

The service term for the software arrangements is variable.

The Company does not have intra-entity sales or transfers.

The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer, who reviews financial information presented on a consolidated basis to allocate resources, evaluate financial performance and make overall operating decisions.

The measure of segment profit or loss that is most consistent with the consolidated financial statements is consolidated net loss.

The accounting policies of our single reportable segment are the same as those for the consolidated financial statements.

The level of disaggregation and amounts of significant segment expenses that are regularly provided to the CODM are the same as those presented in the consolidated statements of operations.

Likewise, the measure of segment assets is reported on the consolidated balance sheets as total assets.

The total provision for income taxes differs from the amount which would be computed by applying the U.S.

income tax rate to loss before income taxes.

The reasons for these differences are as follows:

Statutory income tax rate

21.00 % 27.60 %

Statutory income tax recovery

$ ( 2,197 ) $ ( 718 )

Increase (decrease) in income taxes

Nondeductible option expenses

Nondeductible legal costs related to the Merger 260 -

Other non-deductible permanent differences 76 -

Taxable capital gain on sale of investment and equipment

Difference in foreign tax rates

Impact of the U.S.

state tax rate ( 349 ) -

State income taxes (net of federal benefit)

Change in valuation allowance

Income tax expense

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities and certain carry-forward balances.

The primary components of the deferred tax assets and liabilities are as follows, for the years indicated below:

Deferred tax assets

Non-capital loss carry-forwards from Canada

Non-capital loss carry-forwards from U.S.

Non-capital loss carry-forwards from Israel

15,572 15,449

Nonvested at December 31, 2023

Stock-based compensation

Research and development expenses

Intangible asset 221 -

Reserves and others

20,701 17,325

As of December 31, 2023, unrecognized compensation cost associated with non-vested share-based employee and non-employee compensation totaled $ 329,622 , which is expected to be recognized over a weighted average period of 16 months.

Common Stock Purchase Agreement

On July 8, 2022, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with B.

Riley Principal Capital II, LLC (“B.

Pursuant to the Purchase Agreement, subject to certain limitations and conditions, the Company has the right, but not the obligation, to sell to B.

Riley up to $ 15,000,000 of shares of the Company’s common stock, par value $ 0.001 per share (“Common Stock”), from time to time.

Sales of Common Stock to B.

Riley under the Purchase Agreement, and the timing of any such sales, are solely at the Company’s option, and the Company is under no obligation to sell any securities to B.

Riley under the Purchase Agreement.

Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement with the Securities Exchange Commission (the “SEC”) to register under the Securities Act of 1933, as amended (the “Securities Act”) the resale by B.

Riley of up to 4,500,000 shares of Common Stock that the Company may issue or elect, in the Company’s sole discretion, to issue and sell to B.

Riley, from time to time under the Purchase Agreement.

We issued 119,780 common shares valued at $ 150,000 to B.

Riley as a commitment fee.

The cost of the shares was charged to additional paid in capital during the twelve months ended December 31, 2023.

During the twelve months ended December 31, 2023, the Company sold 27,429 shares of common stock under the Purchase Agreement at an average price of $ 6.30 per share, net of fees of approximately $ 0.30 per share.

The net proceeds from these sales were $ 172,108 .

There were no sales under the Purchase Agreement during the twelve months ended December 31, 2022.

Private Offerings of Common Stock

On September 29, 2023, the Company sold 35,000 unregistered shares of its common stock to G.

James Benoit, Jr., its chairman and chief executive officer, in a private offering at a price of $ 5.00 per share from which it raised $ 175,000 of immediately available cash proceeds.

In August 2022 the Company sold 157,256 unregistered shares of its common stock in a private offering at a price of $ 12.00 per share from which it raised $ 1,887,000 of immediately available cash proceeds, including $ 600,000 from Mr.

Benoit for 50,000 shares at $ 12.00 per share.

The total offering costs associated with the sales of unregistered shares of common stock in 2023 and 2022 were not material.

The shares in the private offering transactions in September of 2023 and August of 2022 were unregistered and subject to a holding period of up to one year under SEC Rule 144 before the securities are able to be sold in the public market.

Loss Per Share

Basic loss per share excludes dilution and is computed by dividing the loss attributable to common shareholders by the weighted-average number of shares outstanding for the period.

Diluted (loss) income 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 effect of 30,946 and 84,173 shares from stock options, and zero and 7,538 shares from warrants were excluded from diluted shares for the years ended December 31, 2023 and 2022, respectively.

Financial Statement Captions

The following table summarizes the Company’s prepaid expenses and other current assets as of December 31, 2023 and 2022:

Deferred costs of revenue

Deferred tax liabilities

Property, plant and equipment ( 18 ) -

Valuation allowances for deferred tax assets

( 20,683 ) ( 17,325 )

Stock issuance costs

Prepaid insurance

Net deferred tax assets

The net deferred tax assets have been offset by a valuation allowance because it is not more likely than not the Company will realize the benefit of these deferred tax assets.

The Company does not have any unrecognized tax benefits as of December 31, 2024 and 2023.

At December 31, 2024, the Company's Canadian, US, and Israeli non-capital income tax losses, the benefit of which has not been recognized on the consolidated financial statements, expire as follows:

(State - California)

$ - $ - $ - $ -

Licenses and subscriptions

2043 - - 1,278 -

2044 15 - 4,803 -

The following table summarizes the Company’s other current liabilities as of December 31, 2023 and 2022:

Legal and professional fees

- 17,733 - 67,706

Cost of professional services

Cost of software sales

Directors' fees

Interest expense

$ 17 $ 17,733 $ 6,081 $ 67,706

EXHIBIT INDEX

Plan of Domestication (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on December 16, 2021)

Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on December 16, 2021)

Bylaws (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on December 16, 2021)

Description of Securities (incorporated by reference to Exhibit 4.1 of the 2021 Company’s Annual Report on Form 10-K filed on April 12, 2022)

Executive Employment Agreement, by and between the Company and G.

James Benoit, Jr.

(incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 30, 2021)

Executive Employment Agreement, by and between the Company and Timothy G.

Hannon (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on March 24, 2022)

Form of Warrant (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on August 30, 2021)

Commercial Line of Credit Renewal Agreement, dated April 30, 2022, by and between the Company, Tellenger, Inc.

and Summit Community Bank (incorporated by reference to Exhibit 10.4 of the 2022 Company's Annual Report on Form 10-K filed on April 17, 2023).

Business Loan Agreement, dated April 30, 2022, by and between the Company, Tellenger, Inc.

and Summit Community Bank (incorporated by reference to Exhibit 10.5 of the 2022 Company's Annual Report on Form 10-K filed on April 17, 2023).

Commercial Security Agreement, dated April 30, 2022, by and between the Company, Tellenger, Inc.

and Summit Community Bank (incorporated by reference to Exhibit 10.6 of the 2022 Company's Annual Report on Form 10-K filed on April 17, 2023).

2006 Stock Incentive Plan (incorporated by reference to Appendix A of the Company’s definitive proxy statement on Schedule 14A filed on April 19, 2006)

2016 Stock Incentive Plan (incorporated by reference to Exhibit A of the Company’s definitive proxy statement filed on April 11, 2016)

2021 Stock Incentive Plan (incorporated by reference to Appendix 4 of the Company’s definitive proxy statement filed on October 26, 2021)

Form of Series A Warrant (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on December 16, 2021)

Common Stock Purchase Agreement by and between WaveDancer, Inc., and B.

Riley Principal Capital II, LLC dated July 8, 2022 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on July 11, 2022)

Registration Rights Agreement by and between WaveDancer, Inc., and B.

Riley Principal Capital II, LLC dated July 8, 2022 (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on July 11, 2022)

Subsidiaries of the Company

Consent of Independent Registered Public Accounting Firm, CohnReznick LLP

Power of Attorney (included as part of the signature page of this Annual Report on Form 10-K)

Rule 13a-14(a) / 15a-14(a) Certification by Chief Executive Officer

Rule 13a-14(a) / 15a-14(a) Certification by Chief Financial Officer

Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS)

+ Management contract, compensatory plan or arrangement.

* Filed herewith.

** Furnished herewith.

The above losses are subject to limitation under IRC section 382 as a result of the ownership change on August 12, 2024.

A preliminary estimate, based on the Company's valuation as of the date of the ownership change and utilizing the long-term tax-exempt rate, indicates an approximate annual Section 382 limitation of $ 1,870 .

It is important to note that this limitation may be subject to certain favourable adjustments available to annual limitation calculation .

Included within the above presentation, the Company reduced its pre-change net operating loss carryforwards of $ 5,411 related to subsidiary Elminda 2022 Inc.

Due to the ownership change and the determination that Elminda 2022 Inc.

had no realizable value, these carryforwards are deemed to be fully limited under Section 382.

At December 31, 2024 and 2023, the Company had a cumulative carry-forward pool of Israeli research and development expenditures in the amount of $ 862 and $ 889 , respectively, which will be amortized within the next two years.

The 2021 through 2024 U.S.

state tax returns are subject to examination by state tax authorities.

In Canada, the taxation years of 2021 - 2024 remain open to assessment by the Canadian tax authority, which the tax authority can reassess within four years of the date it sent the original notice of assessment for the tax year given the Company is not a Canadian-controlled private corporation.

In Israel, the taxation years of 2021 - 2024 remain open to assessment by the Israeli tax authority, which the tax authority can reassess within four years from the end of the tax year in which the tax return is filed.

SUBSEQUENT EVENTS

The subsequent events below are major events or transactions that occurred after the year ended December 31, 2024, but before the issuance of these consolidated financial statements.

The below events occurred between January 1, 2025 and April 3, 2025:

On February 12, 2025, PIPE Warrants (Note 12.b ) to purchase up to 823,529 and Pre-funded warrants (Note 12.c ) to purchase up to 504,324 were exercised and 1,327,853 shares of common stock were issued.

The Company received aggregate gross proceeds of $ 5,625 .

On February 14, 2025, convertible promissory note (Note 9 ) was converted to 800,000 shares of common stock.

On February 19, 2025, Convertible Promissory Note Warrants (Note 9 ) to purchase up to 800,000 warrants were exercised and 800,000 shares of common stock were issued.

The Company received aggregate gross proceeds of $ 3,200 .

On March 28, 2025, the Company issued 547,737 units, with each unit consisting of one share of common stock and one warrant to purchase one share of common stock, at a combined purchase price of $ 3.00 per unit.

The Company received aggregate net proceeds of $ 1,567 .

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

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

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WaveDancer, Inc.

James Benoit, Chief Executive Officer

March 20, 2024

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints G.

James Benoit and Timothy G.

Hannon, jointly and severally, his attorney-in-fact, each with the full power of substitution, for such person, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might do or could do in person hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

April 3, 2025

Firefly Neuroscience, Inc.

/s/ Greg Lipschitz

Greg Lipschitz

Chief Executive Officer

March 20, 2024

/s/ Timothy G.

( Principal Executive Officer )

/s/ Paul Krzywicki

Paul Krzywicki

Chief Financial Officer

March 20, 2024

/s/ William Pickle

March 20, 2024

William Pickle

/s/ Bonnie K.

March 20, 2024

( Principal Financial and Accounting Officer )

/s/ Greg Lipschitz

Chief Executive Officer (principal executive officer)

April 3, 2025

Greg Lipschitz

/s/ Paul Krzywicki

Chief Financial Officer (principal financial officer and principal accounting officer)

April 3, 2025

Paul Krzywicki

/s/ Arun Menawat

Chairman of the Board of Directors

April 3, 2025

/s/ David DeCaprio

April 3, 2025

David DeCaprio

/s/ Brian Posner

April 3, 2025

/s/ Stella Vnook

April 3, 2025

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 9A. Controls and Procedures