Item 5. Market for Registrant’s Common Equity
ITEM 5.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
On August 12, 2024, the Merger closed, and on August 13, 2024, we began trading on Nasdaq under the ticker symbol “AIFF.” Prior to the listing, there was no public market for our Common Stock.
Number of Holders of Our Common Stock
As of March 25, 2026, there were approximately 354 holders of record of our Common Stock, which does not include holders whose shares are held in nominee or “street name” accounts through banks, brokers or other financial institutions.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this Item regarding equity compensation plans is incorporated by reference to the information set forth in Part III. Item 12. “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Securities Authorized for Issuance Under Equity Compensation Plans ”.
Dividend Policy
We have never declared or paid cash dividends on our Common Stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our Common Stock in the near future. We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our Common Stock. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. See also Part I. Item 1A. “ Risk Factors – We do not anticipate that we will pay any cash dividends in the foreseeable future .”
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Recent Sales of Unregistered Securities
During 2025, we did not sell any equity securities that were not subsequently registered under the Securities Act and that were not previously disclosed in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
Purchases of Equity Securities
No repurchases of our Common Stock were made during the 2025 fiscal year.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly in the sections titled Part I. Item 1A. “Risk Factors” and “Introductory Notes – Cautionary Note Regarding Forward-Looking Statements”.
Overview
Firefly Neuroscience, Inc. is an artificial intelligence company advancing precision neuroscience, applying AI and large-scale electrophysiological data to give clinicians a more complete, objective picture of how an individual patient's brain is functioning.
Firefly Neuroscience, Inc. is rebuilding the foundation of how electrophysiological data flows into clinical decision-making for brain health. We believe the brain is the most under-measured organ in medicine, and that the tools to change this have, until now, been inaccessible to the clinicians who need them most.
We have built the Firefly Platform: a vertically integrated hardware, software, and data infrastructure that captures standardized electroencephalographic (EEG) and event-related potential (ERP) assessments at the point of care, analyzes that data through our proprietary analytics engine, and delivers structured, clinician-ready reports back to the provider, all within a single seamless workflow. Every scan expands and enriches our database. Every clinic that joins our network increases the depth and diversity of our data. We describe this compounding relationship between clinical deployment, data acquisition, and report quality as the Firefly Flywheel.
Our FDA-510(k) cleared Evoke System, commercially deployed as the Evoke System, is in active use across more than 85 clinical sites in the United States as of December 31, 2025. Clinicians use the system to perform EEG and ERP assessments, which are analyzed by our cloud-based platform and returned as structured reports designed to support clinical decision-making. Our subscription-based commercial model creates a recurring revenue stream that scales in lockstep with clinical utilization, meaning that the more deeply clinicians integrate electrophysiological assessment into their practice, the more revenue we generate and the more our database grows.
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Recent Developments
Warrants Exercises
During the week of February 21, 2025, we received total proceeds of $8,825 from the exercise of warrants to purchase 823,530 shares of the Common Stock, at an exercise price of $6.83, and warrants to purchase 800,000 shares of Common Stock, at an exercise price of $4.00, respectively. The warrants were issued pursuant to private placements that closed on August 12, 2024, and December 20, 2024, and no new warrants were issued by the Company as a result of the exercises.
March 2025 Units Offering
On March 28, 2025, we entered into the private placement subscription agreement (the “Subscription Agreement”) with the subscribers (“Subscribers”), pursuant to which we issued and sold 547,737 of units (each “March 2025 Unit”, and collectively, the “March 2025 Units”), at a purchase price of $3.00 per Unit. Each March 2025 Unit consists of (i) either (A) one share of Common Stock or (B) a prefunded warrant to purchase Common Stock to the extent that acquiring the shares of Common Stock instead of such prefunded warrants would have caused the Subscriber to own in excess of 4.99% of the shares of outstanding Common Stock on a post-issuance basis and (ii) one Common Stock purchase warrant to purchase Common Stock over thirty-six (36) months at an exercise price of $4.00 per share. On the same date, the closing under the Subscription Agreement occurred, and we issued the March 2025 Units to the Subscribers.
The prefunded warrants have a nominal exercise price of $0.0001 (subject to standard adjustments for stock splits, stock dividends, recapitalizations, mergers and similar transactions) and may be exercised on a cashless basis. The prefunded warrants also contain a beneficial ownership limitation which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise, any portion of a prefunded to the extent that, after giving effect to the exercise, such holder (together with such holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares issuable upon the exercise. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.
In connection with the March 2025 Units Offering, we entered into a finder’s fee agreement with Canaccord Genuity Corp. (“Canaccord”), pursuant to which the Company paid Canaccord at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Canaccord, paid in cash; and (ii) the issuance of the Finder’s Warrant to Canaccord of up to 7.5% of the Units subscribed for by person introduced to the Company by Canaccord. Each Finder’s Warrant is exercisable to purchase one additional Common Stock at $4.00 per share for a period of 36 months from the closing of the March 2025 Units Offering.
In connection with the March 2025 Units Offering, we entered into a finder’s fee agreement with Research Capital Corporation (“Research Capital”), pursuant to which the Company paid Research Capital at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Research Capital, paid in cash; and (ii) the issuance of the Finder’s Warrant of the Company to Research Capital of up to 7.5% of the March 2025 Units subscribed for by person introduced to the Company by Research Capital. Each Finder’s Warrant is exercisable to purchase one additional Common Stock at $3.00 per share for a period of 3 years from the date of issuance of such Finder’s Warrant.
Share Issuance to Wellington-Altus
On April 29, 2025, the Company issued 16,666 shares of Common Stock to National Bank Financial Inc. as consideration for financial advisory services provided by Wellington-Altus Private Wealth Inc., at a price of $3.00 per share, for an aggregate amount of $49,998.
Letter Agreements with BPY Limited and Nomis Bay Ltd.
On January 9, 2025, the Board approved the issuance of an aggregate of 122,407 shares of the Common Stock to BPY Limited (“BPY”) and an aggregate of 217,593 shares of Common Stock to Nomis Bay Ltd. (“Nomis Bay”), as an inducement for the exercise of their respective Common Stock purchase warrants dated August 12, 2024 (collectively, the “Investors Share Issuances”). On February 11, 2025, the Investors exercised such warrants (the “Prior Exercise”) in reliance on the Investors Share Issuances. On April 18, 2025, the Board approved the Company’s entry into separate letter agreements with BPY and Nomis Bay (collectively, the “Letter Agreements”) in connection with the Investors Share Issuance and in exchange for, and in reliance upon the Prior Exercise. The Letter Agreements were executed on the same date. Pursuant to the Letter Agreements, the Company agreed to issue common stock comprising the Investors Share Issuance within two (2) business days from the date of the Letter Agreements, with such shares to be registered in the manner designated by each Investor and each Investor granted the Company a broad release of any and all claims relating to the Prior Exercise.
Share Issuance to Midwood Advisors
On April 16, 2025, we issued 3,333 shares of Common Stock to Midwood Advisors LLC as consideration for financial advisory services, at a price of $3.00 per share, for an aggregate amount of $10,000.
Settlement Agreement with Ian McLean and 1128526 Alberta Ltd.
On April 18, 2025, the Board approved the Company’s entry into a Mutual Release & Settlement Agreement (the “Settlement Agreement”) and a related Private Placement Subscription Agreement (the “Subscription Agreement”) with Ian McLean (“McLean”) and 1128526 Alberta Ltd. (“1128526 Alberta”), an entity controlled by McLean (collectively, the “McLean Parties”), to resolve a dispute arising from McLean’s prior employment with the Company and a pending civil claim in the Ontario Superior Court of Justice.
Under the terms of the Settlement Agreement, and in full and final satisfaction of all claims, including claims for severance, wages, stock compensation, and damages, the Company agreed to issue 21,000 shares of common stock to 1128526 Alberta (the “McLean Parties Settlement Shares”). The parties executed broad mutual releases of any and all claims arising from or relating to McLean’s employment, termination, or the related litigation. The releases extend to claims under employment standards legislation, human rights laws, and common law and include an agreement by the McLean Parties to file a discontinuance of the Ontario litigation on a without-cost basis.
The Subscription Agreement provides that the McLean Parties Settlement Shares will be issued on a fully diluted basis and will be subject to applicable transfer restrictions under U.S. and Canadian securities laws, and that such securities are being issued without registration under the Securities Act of 1933, as amended, in reliance on the exemption provided under Section 4(a)(2) thereof and Rule 506(b) of Regulation D. The McLean Parties Settlement Shares will bear a customary restrictive legend and may not be transferred without registration or an available exemption.
Evoke Acquisition
On April 30, 2025, we acquired all outstanding stock of Evoke, a privately held company which provides customers with a package of hardware and software to measure the electrical activity of the brain. The consideration transferred of approximately $6,000 and consists of $3,000 in cash and 857,142 shares of our Common Stock valued at $3.50 per share.
June 2025 Units Offering
On June 16, 2025, we entered into a securities purchase agreement (the “June 2025 Purchase Agreement”) with the investors, pursuant to which we issued and sold 400,000 of Units, at a purchase price of $3.00 per June 2025 Unit. Each Unit consists of (i) either (A) one share of Common Stock, or (B) a prefunded warrant to purchase one share of Common Stock at a nominal exercise price of $0.0001 per share, to the extent that acquiring the shares of Common Stock instead of the Pre-Funded Warrant would have caused the investors to own in excess of 4.99% of the outstanding Common Stock on a post-issuance basis; (ii) one Common Stock purchase warrant to purchase one share of Common Stock over five (5) years at an exercise price of $3.50 per share (the “$3.50 Warrants”); and (iii) one Common Stock purchase warrant to purchase one share of Common Stock over five (5) years at an exercise price of $4.00 per share (the “$4.00 Warrants”). The Prefunded Warrant, the $3.50 Warrant and the $4.00 Warrant include a beneficial ownership limitation, which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise any portion of the warrants, to the extent that, after giving effect to such exercise, the holder (together with the holder’s affiliates) would beneficially own more than 4.99% of the outstanding shares of Common Stock immediately after the issuance of the Common Stock issuable upon exercise. On the same date, the closing under the June 2025 Purchase Agreement occurred, and the Company issued 400,000 Units to investors at a total purchase price of $1,200.
Share Issuance to Charlotte Baumeister
On June 23, 2025, we issued 5,000 shares of Common Stock to Charlotte Baumeister as consideration for consulting services, pursuant to the Share Issuance and Release of Liability Agreement.
Share Issuance to Jason DuBraski
On June 23, 2025, we issued 8,216 shares of Common Stock to Jason DuBraski to as severance payment to pay Jason DuBraski’s unused vacation and reimburse Jason DuBraski for legitimately incurred expenses, pursuant to the Separation Agreement and Release.
Amendment No.1 to the Firefly Neuroscience, Inc. 2024 Long-Term Incentive Plan
On October 27, 2025, the stockholders of the Company approved Amendment No.1 to the 2024 Plan to (i) increase the maximum number of shares available for grant under the 2024 Plan (the “2024 Plan Share Limit”) by 317,820 shares of Common Stock, and (ii) on the first day of each calendar year during the term of the 2024 Plan, commencing on January 1, 2026 and continuing until (and including) January 1, 2035, to automatically increase the 2024 Plan Share Limit to a number equal the lower of (a) four percent (4%) of the total number of shares of Common Stock issued and outstanding on the last calendar day of the prior fiscal year or (b) a number of shares of Common Stock determined by the Board.
As of December 31, 2025, stock options have been granted under the Plan to certain officers, directors, employees, and consultants that may be exercised to purchase a total of 15,000 shares of common stock. In addition, as of December 31, 2025, a total of 794,879 shares of restricted stock units and 239,084 shares of deferred stock units have been granted under the Plan. See Item 11. “ Executive Compensation – Firefly Neuroscience, Inc.- Firefly Neuroscience, Inc. 2024 Long-Term Incentive Plan ” for a summary of the principal features of the Plan.
Warrants Cancellation and Exchange
On December 16, 2025, we entered into a warrants cancellation and exchange agreement (the “Warrant Exchange Agreement”) between the Company and each of certain investors (collectively, the “Warrant Investors”). The Warrant Exchange Agreement provides for (i) the surrender and cancellation of certain outstanding warrants previously issued to the Warrant Investors on June 16, 2025 (the “June 2025 Warrants”) pursuant to the June 2025 Securities Purchase Agreement, and (ii) the exchange of the June 2025 Warrants for the new warrants (the “New 2025 Warrants”) to purchase the Common Stock, pursuant to Section 3(a)(9) under the Securities Act (the “Warrants Cancellation and Exchange”).
The June 2025 Warrants that were surrendered and exchanged under the Warrant Exchange Agreement consisted of warrants to purchase an aggregate of 400,000 shares of Common Stock at an exercise price of $3.50 per share and warrants to purchase an aggregate of 400,000 shares of Common Stock at an exercise price of $4.00 per share. In exchange for the June 2025 Warrants, the Company agreed to issue to the Warrant Investors the New 2025 Warrants to purchase 800,000 Common Stock at an exercise price of $0.50 per share. Each of the New 2025 Warrants is exercisable for the same number of Common Stock as the respective June 2025 Warrants. The Warrant Holders agreed to exercise, within ten (10) business days after the Exercise Date (as defined in the New 2025 Warrants), such number of New 2025 Warrants to the maximum extent then permitted by the Beneficial Ownership Limitation (as defined in the New 2025 Warrants) set forth in Section 2(e) of the New 2025 Warrants, and to exercise any remaining New 2025 Warrants from time to time thereafter as and when permitted by the Beneficial Ownership Limitation (as such limitation may be increased or decreased in accordance with the terms of the New 2025 Warrants), until the New 2025 Warrants have been exercised in full.
At The Market Offering
On February 3, 2026, we entered into an At the Market Offering Agreement (the “ATM Agreement”) with Konik Capital Partners, LLC, a division of T.R. Winston and Company, LLC (“Konik”), pursuant to which we may, from time to time, offer and sell shares of its Common Stock, par value $0.0001 per share, having an aggregate sales price of up to $7,434,266 (the “ATM Shares”) through Konik as principal or agent. Sales of the ATM Shares through Konik, if any, will be made by any method permitted by law deemed to be an “at the market offering” (the “ATM”), as defined in Rule 415(a)(4) under the Securities Act. Konik will use commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell the ATM Shares from time to time, based on instructions from the Company.
The offer and sale of shares of Common Stock will be made pursuant to the Company’s shelf registration statement on Form S-3, which was filed with the SEC on December 3, 2025 (File No. 333‑282931) (the “Shelf Registration Statement”), and a related prospectus, as supplemented by prospectus supplements pursuant to Rule 424(b) under the Securities Act. The Shelf Registration Statement was declared effective by the SEC on December 5, 2025.
We have no obligation to sell, and Konik is not obligated to buy or sell, any of the ATM Shares under the ATM Agreement and may at any time suspend offers under the ATM Agreement or terminate the ATM Agreement as provided for in the ATM Agreement. The offering of the ATM Shares will terminate upon the earlier of (i) the sale, pursuant to the ATM Agreement, of ATM Shares having an aggregate offering price of $7,434,266, and (ii) the termination by the Company or Konik of the ATM Agreement pursuant to its terms.
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We will pay Konik a commission equal to 2.0% of the aggregate gross proceeds from the sales of ATM Shares sold through Konik under the ATM Agreement and will also reimburse Konik for the fees and costs of its legal counsel reasonably incurred in connection with entering into the transactions contemplated by the ATM Agreement in an amount not to exceed $50,000 in the aggregate, and up to an additional $5,000 per due diligence update session (and in no event more than $20,000 per fiscal year) for diligence and maintenance of the ATM Agreement. The ATM Agreement contains certain covenants, representations and warranties customary for an agreement of this type. We agreed to provide indemnification and contribution to the Sales Agent against certain liabilities, including liabilities under the Securities Act.
March 2026 Units Offering
On March 8, 2026, we entered into a securities purchase agreement (the “March 2026 Purchase Agreement”) with certain accredited investors (each a “March 2026 Investor” and, collectively the “March 2026 Investors”), pursuant to which the Company agreed to issue and sell up to 13,500,000 of units (each a “March 2026 Unit” and, collectively the “March 2026 Units”), at a purchase price of $1.50 per March 2026 Unit. Pursuant to the March 2026 Purchase Agreement, (i) the March 2026 Investors agreed to purchase March 2026 Units for an aggregate purchase price of $2,250,000 (the “Initial Investment”) at an initial closing (the “Initial Closing”), and (ii) the March 2026 Investors have the right, but not the obligation, to purchase in the aggregate, up to $18,000,000 of March 2026 Units (the “Additional Investment”) in one or more subsequent closings (each, an “Additional Closing” and, together with the Initial Closing, each a “Closing”) in respect of one or more Additional Investments, within thirty (30) days following the Initial Closing Date (as defined in the March 2026 Purchase Agreement).
Each March 2026 Unit consists of (i) either (A) one share (each a “"March 2026 Share”" and, collectively, the “"March 2026 Shares”") of Common Stock, or (B) a prefunded warrant to purchase one share of Common Stock (each a "March 2026 Pre-Funded Warrant" and, collectively, the "March 2026 Pre-Funded Warrants”) at a nominal exercise price of $0.0001 per share, to the extent that acquiring the shares of Common Stock instead of the March 2026 Pre-Funded Warrants would have caused the March 2026 Investors to own in excess of 4.99% or 9.99%, as applicable to each such March 2026 Investor, of the outstanding Common Stock on a post-issuance basis; (ii) one common stock purchase warrant (each a “150% Warrant” and, collectively, the “"150% Warrants”“) to purchase one share of Common Stock over five (5) years at an exercise price of $1.88 per share; (iii) one common stock purchase warrant (the “200% Warrant”, together with the March 2026 Pre-Funded Warrants and 150% Warrants, the “March 2026 Warrants”) to purchase one share of Common Stock over five (5) years at an exercise price of $2.50 per share; and (iv) the issuance of the Common Stock upon the exercise of the March 2026 Warrants (collectively, the “March 2026 Warrant Shares”). The March 2026 Warrants include a beneficial ownership limitation, which provides that the Company shall not effect any exercise, and a holder shall not have the right to exercise any portion of the March 2026 Warrants, to the extent that, after giving effect to such exercise, the holder (together with the holder’s affiliates) would beneficially own more than 4.99% or 9.99%, as applicable to each such March 2026 Investor, of the outstanding shares of Common Stock immediately after the issuance of the Common Stock issuable upon exercise. On March 12, 2026, the Initial Closing under the March 2026 Purchase Agreement occurred, and the Company issued 1,500,000 March 2026 Units to the March 2026 Investors at a total purchase price of $2,250,000. On March 8, 2026, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain accredited investors (the "Investors") for a private placement of units ("Units") at a purchase price of $1.50 per Unit. On March 12, 2026 (the "Initial Closing"), the Company issued 1,500,000 Units for aggregate gross proceeds of $2,250,000.
The offering was conducted as a private placement under Section 4(a)(2) of the Securities Act of 1933 and/or Rule 506(b) of Regulation D, and was structured to comply with Nasdaq Listing Rule 5635(d) without requiring stockholder approval. The Company has agreed to file a registration statement on Form S-1 covering the resale of the shares and warrant shares on or before April 15, 2026.
In connection with the Purchase Agreement, each Investor entered into a Lock-Up Agreement restricting transfers of all securities issued under the Purchase Agreement for six months following the Initial Closing (through September 12, 2026), followed by a six-month graduated release of one-sixth of restricted securities per month through March 12, 2027.
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Financial Operations Overview
Revenue
Revenue consists of subscriptions with associated equipment, per-use fees, equipment sales, equipment rentals, and the undertaking of projects and/or clinical studies and other related services. In the future, we plan to generate revenue through two segments: through the use of our products by healthcare professionals in the United States and through collaborations with pharmaceutical companies in support of neuroscience drug development.
Operating Expense
Costs of goods sold
Cost of goods sold consists of product manufacturing expenses related to the Evoke and Versus products acquired in the Evoke transaction, customer support costs and depreciation of Firefly provided customer equipment.
Research and Development Expenses
Research and development expenses represent costs incurred to conduct research and development, such as the development/enhancements of the Evoke Platform and BNA technology. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
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salaries and benefits;
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consulting arrangements; and
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other expenses incurred to advance our research and development activities.
We expect research and development expenses to continue to increase in the future as we further refine and optimize our products and invest in their evolution. It is likely that we will continue to evaluate opportunities and strategic partnerships to acquire or license other products and technologies, which may result in higher research and development expenses due to licensing fees and/or integrations.
Selling and Marketing Expenses
Selling and marketing expenses consist of employee-related expenses, including salaries, benefits, travel, clinical fees and other marketing functions such as conferences, as well as fees paid for consulting services.
General and Administrative Expenses
General and administrative expenses consist of employee-related expenses, including salaries, benefits, travel and noncash stock-based compensation, and other administrative functions, as well as fees paid for legal, and accounting services, consulting fees and facilities costs not otherwise included in research and development expense. Legal costs include general corporate legal fees and patent costs. We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, additional insurance, investor relations and other administrative expenses and professional services.
Other (Income) Expense
Other (income) expense, consists, primarily of interest bank fees and loan fees, foreign exchange gain or loss, changes in derivative fair value, impairments and penalties.
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Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates on historical experience, current market and economic conditions, and other assumptions that management believes are reasonable under the circumstances. Actual results may differ materially from those estimates.
The following critical accounting estimates supplement, and should be read in conjunction with, the description of our significant accounting policies contained in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The discussion below focuses on the key judgments, assumptions, and sensitivities that management considers most significant.
1. Business Combination — Purchase Price Allocation (Evoke Neuroscience Acquisition)
Nature of the Estimate . On April 30, 2025, we completed the acquisition of Evoke Neuroscience, Inc. for total consideration of $6,221, consisting of $3,000 in cash and 857,142 shares of our common stock. We accounted for the transaction as a business combination under ASC 805, Business Combinations, which required us to measure at fair value the identifiable assets acquired and liabilities assumed as of the acquisition date. Significant acquired intangible assets included developed technology ($700), a trade name ($150), and non-compete arrangements ($110), with the remainder allocated to goodwill ($5,175) and net tangible assets. The final purchase price allocation was completed on August 12, 2025.
Key Assumptions and Estimation Uncertainty . The allocation required significant estimates relating to expected future cash flows, including: (i) projected revenues under Evoke’s planned transition to a subscription/lease model — a model that was novel for Evoke and for which limited historical data was available at the acquisition date; (ii) gross margin assumptions and capital expenditures required to support the rental model; (iii) selling and administrative cost allocations; (iv) working capital requirements; and (v) discount rates and economic useful lives assigned to each intangible asset class. The allocation of purchase price among asset classes directly affects future amortization expense and the magnitude of goodwill recorded.
Sensitivity. Management prepared a sensitized purchase price allocation as of March 11, 2026, revising several inputs including the amount and timing of revenues, gross margin assumptions, selling expense rates, the removal of non-recurring public company costs from the operating model, and the addition of capital expenditures to support the model. While these revisions resulted in a reallocation of $220 from finite-lived intangibles to goodwill (goodwill of $5,390 under the sensitized model), management assessed this reallocation to be immaterial to the financial statements. The long-term revenue outlook and terminal-year gross profit are broadly comparable between the two models. Accordingly, no adjustments were made to the amounts previously recognized in the financial statements.
2. Goodwill Impairment Assessment
Nature of the Estimate . In connection with our April 2025 acquisition of Evoke, we recorded goodwill of $5,175. We operate as a single reporting unit — the consolidated entity — as the Evoke assets were fully integrated into Firefly’s existing platform rather than operated as a standalone business, and our Chief Operating Decision Maker (CEO) reviews performance and allocates resources on a consolidated basis. Goodwill is tested for impairment annually as of December 31, or more frequently if events or circumstances indicate the carrying value may not be recoverable.
Qualitative Assessment. For the year ended December 31, 2025, we performed a qualitative assessment under ASC 350-20-35-3C and evaluated all relevant events and circumstances. No macroeconomic, industry, cost, or entity-specific indicators of impairment were identified. With respect to share price: while our share price declined from $3.20 at the acquisition date (April 30, 2025) to $0.88 at December 31, 2025, our market capitalization of approximately $12.3 million (based on 13,964,367 shares outstanding) significantly exceeded our net assets of approximately $7.6 million throughout the period. As further corroboration, our share price recovered to $1.73 by March 11, 2026, implying a market capitalization of approximately $26.8 million following the March 2026 private placement — well in excess of carrying value.
Conclusion and Sensitivity . Based on the totality of events and circumstances, we concluded that it is not more likely than not that the fair value of our reporting unit is less than its carrying amount as of December 31, 2025, and accordingly the quantitative impairment test was not required. No goodwill impairment was recognized. Key factors supporting this conclusion include: (i) market capitalization exceeding net assets throughout the period and as of the issuance date; (ii) the absence of adverse changes to the Evoke technology’s commercial prospects; (iii) multiple new customer subscription agreements executed in Q4 2025; and (iv) the March 2026 private placement at $1.50 per unit providing corroborating evidence of fair value. If conditions deteriorate materially — including a sustained decline in market capitalization below book value or failure to achieve projected revenue ramps under the subscription model — a quantitative impairment test would be required and could result in an impairment charge.
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3. Impairment of Long-Lived Assets
Nature of the Estimate. Prior to the Evoke acquisition, Firefly’s long-lived assets consisted of medical equipment (Zeto headsets, net carrying value of $136 as of December 31, 2024) and developed software intangible assets (BNA software, net carrying value of $180 as of December 31, 2024). Under ASC 360, long-lived assets are tested for recoverability when events or changes in circumstances indicate the carrying amount may not be recoverable.
Impairment Recognized . During the year ended December 31, 2025, management identified a triggering event for these pre-acquisition assets following the strategic decision to discontinue the BNA software platform and Zeto headsets as a result of the Evoke acquisition and the shift in strategic direction to focus exclusively on Evoke’s FDA-cleared EEG system.
Management assessed that the undiscounted future cash flows from these assets were nil, as management no longer intends to use these assets and was unable to return or sell the headsets to the manufacturer. The fair value of these assets was similarly assessed as nil. Accordingly, impairment losses were recognized in full, writing down the net carrying values of the Zeto headsets $99 and BNA software $152 to nil. Total impairment recognized on pre-acquisition Firefly assets was $251.
The identifiable intangible assets acquired from Evoke (developed technology, trade name, and non-compete arrangements) were separately evaluated for indicators of impairment. While management noted revised revenue timing and integration execution considerations, these factors reflect timing differences in the subscription model transition rather than a deterioration in total expected cash flows. The Evoke technology continues to be deployed as planned, with multiple new customer agreements executed under the subscription model in Q4 2025. No impairment was recognized on Evoke’s long-lived assets.
4. Stock-Based Compensation
Nature of the Estimate . We measure stock-based compensation expense for all equity awards based on the grant-date fair value of the award, recognized over the requisite service period. For stock options, fair value is estimated using the Black-Scholes option pricing model.
Key Assumptions and Estimation Uncertainty . The Black-Scholes model requires subjective inputs including: (i) expected volatility, estimated using our historical stock price data supplemented with peer company information given our limited trading history as a Nasdaq-listed company; (ii) expected term, based on the simplified method; (iii) the risk-free interest rate based on U.S. Treasury yields for the expected term; and (iv) expected dividend yield, assumed to be zero as we have not paid and do not expect to pay dividends. Changes in these assumptions can materially affect the fair value assigned to option grants and the amount of compensation expense recognized. Management also applies an estimated forfeiture rate, with cumulative adjustments recorded in the period of change when actual forfeitures differ from estimates.
5. Israel Innovation Authority (IIA) Royalty Obligation
Nature of the Estimate . We have received grants from the IIA in connection with research and development activities. Under the applicable program terms, we are obligated to pay royalties on revenues derived from IIA-funded technologies until cumulative royalties equal total grants received plus interest. We assess this obligation under ASC 450, Contingencies.
Key Assumptions and Estimation Uncertainty. Key judgments include: (i) determination of which products and revenue streams constitute IIA-funded products subject to royalty obligations, particularly in light of the BNA platform’s abandonment and the ongoing commercialization of the Evoke EEG System; (ii) the applicable interest accrual rate; and (iii) the probability and timing of any formal negotiation or settlement with the IIA. The IIA’s rules and enforcement practices are subject to regulatory interpretation, and the ultimate amount payable could differ materially from our current estimate.
Sensitivity. If the IIA were to assert that revenue streams from the Evoke EEG System are subject to royalty obligations, or if the applicable royalty rate or interest accrual differs from our estimates, the recorded liability could increase materially. Conversely, if we successfully negotiate a reduced settlement or obtain a determination that the BNA platform’s abandonment extinguishes or reduces the royalty obligation, the liability could be reduced, resulting in a gain. There can be no assurance as to the outcome of any such determination or negotiation.
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6. Going Concern Assessment
Nature of the Estimate. Under ASC 205-40, management evaluates at each reporting period whether conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation requires significant judgment and involves assumptions about future events that are inherently uncertain.
As of December 31, 2025, we had an accumulated deficit of $111,615 and negative cash flows from operating activities of $8,194 for the year ended December 31, 2025. Based on our current operating plan, we have concluded that substantial doubt exists about our ability to continue as a going concern within twelve months of the issuance of these financial statements.
Key Assumptions . Management’s assessment incorporates projections of: (i) revenue generation from commercial subscriptions of the Evoke EEG System; (ii) the timing and amount of operating expenditures; (iii) the success and timing of future equity or debt capital raises; and (iv) management’s ability to reduce expenditures if anticipated financing is delayed. These assumptions are subject to significant uncertainty and actual results could differ materially.
Mitigation Plans . Management is actively pursuing financing to alleviate these conditions. Subsequent to December 31, 2025, we raised $150 through warrant exercises and $2,250 through a private placement (1,500,000 units at $1.50 per unit, each comprising one common share and two warrants), with investors having the right, but not the obligation, to purchase up to an additional $18,000 of units within 30 days of the initial closing. We have also filed a Prospectus Supplement for an at-the-market offering of up to $7,434,266. However, there can be no assurance that sufficient capital will be raised on acceptable terms, or at all.
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Results of Operations
The following table sets forth key components of our results of operations during the years ended December 31, 2025 and 2024.
Year ended
December 31,
$US, in thousands
2025
2024
Change ($)
REVENUE
$
1,142
$
108
$
1,034
COST OF GOODS SOLD
497
-
$
497
GROSS PROFIT
$
645
$
108
$
537
OPERATING EXPENSES:
Research and development expenses
1,482
1,954
(472
)
Selling and marketing expenses
800
1,201
(401
)
General and administration expenses
6,968
6,133
835
Impairment of assets
251
874
(623
)
TOTAL OPERATING EXPENSES
9,501
10,162
(661
)
OPERATING (LOSS)
(8,856
)
(10,054
)
1,198
OTHER INCOME (EXPENSE)
Interest and bank fees
(159
)
(69
)
(90
)
Interest income
89
-
89
Foreign exchange gain (loss)
(5
)
11
(16
)
Change in derivative fair value
(9,369
)
(156
)
(9,213
)
Loss on settlement
(1,353
)
-
(1,353
)
Other (income) expenses
(224
)
(190
)
(34
)
TOTAL OTHER (EXPENSE)
(11,021
)
(404
)
(10,617
)
(LOSS) BEFORE INCOME TAX
$
(19,877
)
$
(10,458
)
$
(9,419
)
Revenue
Revenue for the year ended December 31, 2025, was $1,142, as compared to $108 in the year ended December 31, 2024, representing an increase of $1,034, or 957%. The increase is primarily due to revenue from the acquisition of Evoke Neuroscience.
Operating Expenses
Cost of Goods Sold
Cost of goods sold for the year ended December 31, 2025, was $497, up from $nil in the same period of 2024. The increase is attributable to manufacturing and inventory costs representing 43% of the increase and a further 33% attributable to labor costs.
Research and Development Expenses
Research and development expenses for the year ended December 31, 2025, were $1,482, as compared to $1,954 for the year ended December 31, 2024, representing a decrease of $472, or 24%. The decrease is primarily due to equity vesting in conjunction with the merger in August 2024.
Selling and Marketing Expenses
Selling and marketing expenses for the year ended December 31, 2025, were $800, as compared to $1,201 for the year ended December 31, 2024, representing a decrease of $401, or 33%. The decrease was primarily due to a reduction in consultant use driven by a rebranding in 2024.
General and Administration Expenses
General and administration expenses for the year ended December 31, 2025, were $6,968, as compared to $6,133 for the year ended December 31, 2024, representing an increase of $835, or 13%. The increase primarily reflects additional costs related to directors and officers (D&O) insurance following the August 2024 Merger, which accounted for approximately 39% of the increase. Another 51% of the increase was attributable to accrued fees associated with the cancellation of the Equity Line of Credit.
Impairment of Assets
Impairment expenses for the year ended December 31, 2025, were $251, as compared to $874 for the year ended December 31, 2024 due to one of the capitalized upgrades no longer being expected to be utilized as a result in a change in management and subsequent direction. Consequently, the upgrade and associated assets were deemed fully impaired, resulting in the Company recording an impairment charge of $251.
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Other (income) expense
Other (income) expense for the year ended December 31, 2025, was $11,021, as compared to $404 for the year ended December 31, 2024, representing an increase of $10,617, mainly due to the change in derivative fair value and loss on settlement of promissory note.
Liquidity and Capital Resources
Going Concern
As of December 31, 2025, we had an accumulated deficit of $111,615 and negative cash flows from operating activities for the year ended December 31, 2025 of $8,194. Further, we have recurring losses with minimal revenue from operations and we expect to continue to generate losses and using cash for operations. While we are attempting to raise funds for commercialization, our monthly cash requirements during the year ended December 31, 2025 have been met through the sale of Common Stock and convertible notes. These conditions raise substantial doubt about our ability to continue as a going concern. Therefore, we may be unable to realize our assets and discharge our liabilities in normal course of business.
Management has a reasonable expectation that we can continue raising additional capital. Subsequent to December 31, 2025, we raised $150 of proceeds through the exercise of stock warrants and $2,250 as part of a private placement and Investors having the right, but not the obligation, to purchase up to an additional $18,000 of Units in one or more subsequent closings within 30 days of the Initial Closing Date.
For the next 12 months, we expect to continue to incur negative cash flows from operations as we integrate our products and continue to invest in the expansion of our sales organization. On April 30, 2025, we acquired all outstanding stock of Evoke for $6,221, consisting of $3,000 in cash and 857,142 shares of our Common Stock.
Beyond the next 12 months, our ability to achieve profitability will depend on the successful commercialization of our combined products portfolio. We expect to incur significant costs associated with continued product development, commercialization, and distribution activities. As a result, we will require substantial additional capital to fund ongoing operations and to implement our business strategy prior to achieving positive cash flows from operating activities.
Until we generate sufficient revenues from product sales to cover operating expenses, working-capital requirements, and capital expenditures, we expect to finance our operations through the issuance of equity, debt financing, or other sources of capital. There can be no assurance that such financing will be available to us on commercially reasonable terms, or at all. If we are unable to obtain additional financing as needed, we may be required to delay, reduce, or discontinue portions of our business plan, which could adversely affect our ability to continue operations.
Management’s plan to address the conditions giving rise to substantial doubt includes: (i) the pursuit of additional capital through equity or debt financings; (ii) disciplined operating expense management and integration synergies from the Evoke acquisition; and (iii) targeted commercial expansion to drive recurring revenue. These plans involve assumptions about capital markets and customer demand that may not materialize as anticipated.
Our expectations regarding the sufficiency of our capital resources in the near term and our ability to obtain additional capital in the long term are based on estimates and assumptions that may prove to be inaccurate. As a result, we could exhaust our available capital resources sooner than anticipated and may not be able to obtain additional funding on favorable terms, or at all.
We have no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that would be material to investors.
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Cash flows
The following table provides detailed information about our net cash flow for fiscal years ended December 31, 2025 and December 31, 2024:
For the year ended December 31,
2025
2024
Change
(in thousands)
Net cash (used in) provided by
Operating activities
$
(8,194
)
$
(6,155
)
$
(2,039
)
Investing activities
$
(2,488
)
$
(477
)
$
(2,011
)
Financing activities
$
11,619
$
6,299
$
5,320
Operating Activities
For the year December 31, 2025, cash used in operating activities was $8,194, as compared to $6,155 for the year December 31, 2024, representing an increase of $2,039 or 33%. This increase in net cash used in operating activities is primarily due to an increase in day-to-day operating costs, a reduction in liabilities, and research and development costs associated with the integrations of the BNA and Evoke Platforms within the business.
Investing Activities
For the year December 31, 2025, net cash used in investing activities was $2,488 as compared to cash used in investing activities of $477 for the year December 31, 2024, representing an increase of $2,011 or 422%. The increase in net cash used in investing activities is attributable to the acquisition of Evoke Neuroscience.
Financing Activities
For the year December 31, 2025, net cash provided from financing activities was $11,619 as compared to $6,299 for the year December 31, 2024, representing an increase of $5,320 or 84%. The increase was primarily due to warrant exercises and unit offerings in both March and June.
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Known Trends, Events, and Uncertainties
We are increasingly reliant on machine learning models for EEG/ERP interpretation. Model performance depends on training data diversity and ongoing monitoring to ensure generalizability. Evolving regulatory guidance (including the FDA’s approach to AI/ML-enabled medical devices) and payer expectations could impact timelines and costs. Additionally, our handling of PHI and clinical data requires robust cybersecurity, vendor oversight, and compliance with HIPAA and CFR Part 11. A significant data breach, integrity failure, or model drift could adversely affect adoption, revenues, and our reputation.
As with other companies that are in our industry, we will need to successfully manage normal business and scientific risks. Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In addition, the emergence and effects of public health crises, such as endemics and epidemics are difficult to predict, changes in Economic and trade policies could have a material and significant impact and the consequences of the ongoing war between Israel and Hamas, including related sanctions and countermeasures and the effects of such war on our employees in Israel, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations. Furthermore, other than as discussed in this Form 10-K, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.
Other than as discussed above and elsewhere in this Form 10-K, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.