FIREFLY NEUROSCIENCE, INC.

DECEMBER 31, 2024 AND 2023

NOTE1: BUSINESS DESCRIPTION

Firefly Neuroscience, Inc. (formerly WaveDancer, Inc.), a Delaware corporation, and its wholly owned subsidiaries Firefly Neuroscience2023, Inc., a Delaware corporation (formerly known as Firefly Neuroscience, Inc.), Firefly Neuroscience Ltd., an Israeli corporation (formerly known as Elminda Ltd.), Elminda2022 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 in2006 under the laws of the State of Israel, and in* May 2014,initiated its marketing and distribution activity in the United States through Elminda2022* 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 AmendmentNo.* 1, dated as of* January 12, 2024,and that certain AmendmentNo.* 2, dated as of* June 17, 2024,“Merger Agreement”) with Firefly Neuroscience2023,* 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 Neuroscience2023,* 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 wasnot 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 wasnot 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, withno goodwill or other intangible assets recorded.

F-9

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: AIFF).

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.

NOTE2: 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, 2024of $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, 2024have 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 beno assurance that we will be able to obtain additional funding on satisfactory terms or at all.

F-10

NOTE3: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP.

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 atwo-tier consolidation model:one focused on voting rights (the voting interest model) and thesecond focused on a qualitative analysis of power over significant activities and exposure to potentially significant losses or benefits (the variable interest model). All entities arefirst evaluated to determine whether they are variable interest entities (“VIE”). If an entity is determinednot 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. 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.

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.

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.

F-11

The Company uses athree-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. Thethree tiers are defined as follows:

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 isnot exposed to any significant market or credit risks arising from these 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, 2024is measured at fair value using an option-pricing model utilizing Level2* 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.

Parties are related ifone 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 arenot restricted as to withdrawal or use and the period to maturity of which didnot exceedthree months at time of investment, to be cash.

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.

F-12

Certain conditions* mayexist as of the date the consolidated financial statements are issued, that mayresult in a loss to the Company but that will only be resolved whenone* or more future events occur or fail to occur. Such losses are disclosed as contingent liabilities if it isnot 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” (“ASC480”) ASC815, “Derivatives and Hedging” (“ASC815”), and ASC718, “Compensation—Stock Compensation” (“ASC718”). The assessment considers whether they are freestanding financial instruments pursuant to ASC480, meet the definition of a liability pursuant to ASC480 or meet all of the requirements for equity classification under ASC815, 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 donot 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.

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 ASC815 and ASC480. 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)”.

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 ASC718, remeasurement isnot 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, 2024and2023,* the fair value of each option grant was estimated using a Black-Scholes option-pricing model.

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.

F-13

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

Revenue is recognized in accordance with ASC606, “Revenue from Contracts with Customers” (“ASC606”). The Company performs the followingfive steps:

The Company applies thisfive-step model to arrangements that meet the definition of a contract under ASC606, 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 ASC606, 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 ASC842 and ASC606. For contracts that are in the scope of both ASC842 and ASC606, and in which the lease component is an operating lease, the Company applies the practical expedient in ASC842 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 consists of payments received from customers in advance of satisfying a performance obligation identified in accordance with ASC606. The change in the deferred revenue balance for the years ended* December 31, 2024,and2023* 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 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 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 offive 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 offour years for medical equipment.

F-14

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 ASC740 “Income Taxes” (“ASC740”), 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 ASC740, the Company* mayrecognize the tax benefit from an uncertain tax position only if it is more likely thannot* that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

Short-term employee benefits are benefits for which full settlement is expected withintwelve 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 section14 to the Israeli Severance Compensation Act,1963 under which the Company pays fixed contributions and will haveno legal or constructive obligation to pay further contributions if the fund doesnot 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.

Reportable Segments

In* November 2023,the FASB issued Accounting Standards Update (“ASU”)2023-07, Improvements to Reportable Segment Disclosures. ASU2023*-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 ASU2023*-07 in this Annual Report on Form10-K for the year ended* December 31, 2024on a retrospective basis and concluded that the application of this guidance didnot* have any material impact on consolidated financial statements. Refer to Note16 for related disclosures.

Income taxes

In* December 2023,the FASB issued ASU2023*-09 “Income Taxes (Topics740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU2023-09 is effective for annual periods beginning* January 1, 2025,with early adoption permitted. The Company hasnot* 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 ASU2024*-03, Disaggregation of Income Statement Expenses (“ASU2024-03”). ASU2024-03 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. ASU2024*-03 can be applied on either a prospective or a retrospective basis at the Company’s election. The Company hasnot 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 (Subtopic470*-20): Induced Conversions of Convertible Debt Instruments,”, or ASU2024-04. ASU2024-04 clarifies the accounting treatment for settlement of a convertible debt instrument as an induced conversion. ASU2024-04 is effective on a prospective basis, with the option for retrospective application, for fiscal years beginning after* December 15, 2025.The Company hasnot* adopted this standard early and is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements disclosures.

F-15

NOTE4: THE MERGER ** **

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, withno 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:*

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:

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:

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. 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 of0.1040* established in the Merger.

NOTE5: ACCOUNTS RECEIVABLE, NET

Details of accounts receivable balance is as follows:

F-16

NOTE6: PREPAID EXPENSES AND DEPOSITS

Detail of prepaid expenses and deposits balance is as follows:

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 Note12.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 (Note11).

NOTE7: EQUIPMENT, NET ** **

Equipment balance is as follows:

Depreciation expense was $12 and$nil for the years ended* December 31, 2024and2023,* 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).”

NOTE8: INTANGIBLE ASSETS, NET

The following tables summarize the composition of intangible assets as of* December 31, 2024:*

During thefourth quarter of2024, management performed the assessment and determined thatone of the capitalized upgrades wasno longer expected to be utilized. Consequently, the upgrade was deemed fully impaired, resulting in the Company recording an impairment charge of $874.

The estimated aggregate future amortization expense for intangible assets subject to amortization as of* December 31, 2024,*is summarized below:

F-17

NOTE9: 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”) (Note12.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 withinfive months, the conversion price adjusts to 90% of the lowest daily VWAP during thefive 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 theten 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 acquireone share of common stock at an exercise price of $4.00 per share for a period offive 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 featurenot 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 ofone year, annualized volatility of 110.71%, and a risk-free rate of 4.27%. 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:

NOTE10: 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 Section14 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 Section14 relieve the Company from any future severance payments in respect of those employees. In accordance with the Israeli Severance Compensation Act, payments for2024 and2023 were $45 and $33, respectively, which are included in salary and employee benefits within research and development expenses.

NOTE11: COMMITMENTS AND CONTINGENCIES

a.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 in2024 or2023. 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 isnot 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, henceno liability has been recognized as of* December 31, 2024and2023.* The contingent liability amounts to $5,833 and $5,625 for2024 and2023, respectively.

F-18

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

b. 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 thefive* 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 didnot* issue any shares pursuant to the Purchase Agreement.

NOTE12: EQUITY

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 intoone 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 ASC718* 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 ofone share of Series C Preferred Stock (the “Series C Preferred Stock”) andone warrant to purchaseone* 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.

F-19

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 acquireone share of common stock at an exercise price of $24.62 per share for a period ofthree years from the date of issuance (Note12.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 (Note14*). 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 ASC718* (Note6).

On* August 12, 2024,the Company issued 45,344 shares of common stock with the intention to settle accrued liabilities. As the Company didnot* 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 (Note12.g*).

In* August 2024,the Company issued 802,142 shares of common stock to WaveDancer’s pre-Merger shareholders (Note4*).

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.

F-20

The following table summarizes the Company’s warrant activity:

F-21

Warrants exercisable for little orno 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:*

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 offive 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 offive 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.

In2010, 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 shallnot* exceedtwelve 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 shallnot exceedten 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 shallnot* exceedone 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.

F-22

The share-based compensation expense related to options for* December 31, 2024and2023* was $1,574 and $295, respectively. The fair value of options granted for the year ended* December 31, 2024and2023* was $1,600 and$nil, respectively. The intrinsic value of the options outstanding as of* December 31, 2024and2023* 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.

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.

As of* December 31, 2024,*there was $461 of total unrecognized compensation cost related to nonvested options granted under the Plan.

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 offive 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 ofthree 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 ASC718.* 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.

F-23

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 offive 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 ofthree 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 ASC718.* 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.

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:

F-24

NOTE13: 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 orno consideration in relation to the share price. Shares of common stock that were issued and are subject to vesting conditions arenot 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 isnot 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,or2023,* as the assumed conversion would be anti-dilutive.

NOTE14: 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 (Note12.e*),288,794 of these options were granted to related parties.

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 offive years from the issuance date (Note12.c*).30,933 of Series D warrants were granted to a company wholly owned byone 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 byone* 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 (Note12.g*).

F-25

NOTE15: REVENUE

NOTE16: SEGMENT REPORTING

The Company hasone 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 doesnot 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.

NOTE17: INCOME TAX

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:

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:

F-26

The net deferred tax assets have been offset by a valuation allowance because it isnot more likely thannot the Company will realize the benefit of these deferred tax assets. The Company doesnot have any unrecognized tax benefits as of* December 31, 2024and2023.*

At* December 31, 2024,the Company's Canadian, US, and Israeli non-capital income tax losses, the benefit of which hasnot* been recognized on the consolidated financial statements, expire as follows:

The above losses are subject to limitation under IRC section382 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 Section382* 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 Elminda2022 Inc. Due to the ownership change and the determination that Elminda2022 Inc. hadno realizable value, these carryforwards are deemed to be fully limited under Section382.

At* December 31, 2024and2023,* 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 nexttwo years.

The2021 through2024 U.S. state tax returns are subject to examination by state tax authorities.

In Canada, the taxation years of2021-2024 remain open to assessment by the Canadian tax authority, which the tax authority can reassess withinfour years of the date it sent the original notice of assessment for the tax year given the Company isnot a Canadian-controlled private corporation.

In Israel, the taxation years of2021-2024 remain open to assessment by the Israeli tax authority, which the tax authority can reassess withinfour years from the end of the tax year in which the tax return is filed.

F-27

NOTE18: 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, 2025and April 3, 2025:*

On* February 12, 2025,PIPE Warrants (Note12.b*) to purchase up to 823,529 and Pre-funded warrants (Note12.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 (Note9*) was converted to 800,000 shares of common stock.

On* February 19, 2025,Convertible Promissory Note Warrants (Note9*) 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 ofone share of common stock andone* warrant to purchaseone 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 acquireone share of common stock at a price of $4.00 per share for a period ofthree 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.