FIREFLY NEUROSCIENCE, INC.

FIREFLY NEUROSCIENCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE1: BUSINESS DESCRIPTION

Overview

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. On* April 30, 2025,*the Company acquired all outstanding stock of Evoke Neuroscience, Inc. (“Evoke”), a Delaware corporation, a privately held company which provides customers with a package of hardware and software to measure the electrical activity of the brain.

NOTE2: GOING CONCERN

As of* June 30, 2025,the Company had an accumulated deficit of $106,257 and negative cash flow from operating activities for thesix* months ended* June 30, 2025,of $4,901. Further, the Company has recurring losses with minimal revenue from operations and expects to continue generating losses and using cash for operations. On April 30, 2025,the Company paid $3,000 of cash for the acquisition of Evoke (Note4*). The Company’s cash requirements have been met through the sales of common stock and warrant exercises. 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 the 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 the Company will be able to obtain additional funding on satisfactory terms or at all.

NOTE3: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Unites States of America (“U.S. GAAP”).

The results reported in these unaudited condensed consolidated financial statements shouldnot be regarded as necessarily indicative of results that* maybe expected for any subsequent period or for the entire period. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s annual audited consolidated financial statements for the year ended December 31, 2024,and the notes thereto included in the Company’s Form10*-K filed with the SEC on* April**3,* 2025. Certain information and footnote disclosures normally included in the audited consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in the accompanying unaudited condensed consolidated financial statements. All amounts are disclosed in thousands, except share and per share amounts. The accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, except as otherwise indicated, necessary for a fair statement of its consolidated financial position, results of operations, and cash flows of the Company for all periods presented.

Principles of consolidation

These unaudited 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

Use of estimates in the preparation of consolidated financial statements

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates and assumptions, and such differences could be material to the Company’s financial position and results of operations.

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Significant accounting policies

With the exception of Business Combinations, Goodwill, Intangible Assets, and Inventory as described below, there have beenno new or material changes to the significant accounting policies discussed in the Company’s audited consolidated financial statements for the year ended* December 31, 2024.*

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of an acquisition is allocated to the assets acquired and liabilities assumed based on their fair values, as determined by management at the acquisition date. Contingent consideration obligations that are elements of consideration transferred are recognized at the acquisition date as part of the fair value transferred in exchange for the acquired business. Contingent consideration arrangements are remeasure at fair value at each reporting period. Examples of critical estimates in valuing certain of the intangible assets acquired include, but arenot limited to, future expected cash inflows and outflows, future fundraising assumptions, expected useful life, discount rates and income tax rates. Acquisition-related costs incurred in connection with a business combination are expensed as incurred and are included in general and administrative expenses in the condensed consolidated statements of operations.

Goodwill

Goodwill is the excess of consideration paid for an acquired entity over the fair value of the amounts assigned to assets acquired, including other identifiable intangible assets, and liabilities assumed in a business combination. To determine the amount of goodwill resulting from a business combination, the Company performs an assessment to determine the acquisition date fair value of the acquired company’s tangible and identifiable intangible assets and liabilities.

Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset* maybe impaired. An entity has the option tofirst* assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events. If the entity determines that this threshold is met, then the Company* mayapply aone*-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value,not to exceed the total amount of goodwill allocated to the reporting unit. The Company determines fair value through multiple valuation techniques and weights the results accordingly. The Company is required to make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of its reporting units. The Company has elected to perform its annual goodwill impairment review on* December**31* of each year utilizing a qualitative assessment to determine if it was more likely thannot that the fair value of each of its reporting units was less than their respective carrying values.

Intangible assets

Identifiable intangible assets primarily include developed technology, software development costs, trade name and non-compete agreements. Amortizable intangible assets are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the assets* maybe impaired. If an indicator of impairment exists, the Company will compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value,no impairment is indicated. If the undiscounted cash flows donot* exceed the carrying value, then impairment, if any, is measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow model.

Inventory

Inventory, which consists of material, labor, and manufacturing overhead and are valued at the lower of cost or net realizable value. Cost is determined using thefirst-in,first-out (“FIFO”) method. The Company periodically reviews the realizability of its inventory for potential excess or obsolescence. Determining the net realizable value of inventory requires management’s judgment. Conditions impacting the realizability of the Company’s inventory could cause actual asset write-offs to be materially different than the Company’s current estimates as of* June 30, 2025.*

Revenue Recognition

Revenue consists of EEG testing, equipment rental, equipment sales, the undertaking of projects and clinical studies, and other related services.

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

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 thesix months ended* June 30, 2025and2024* was driven by payments from customers in advance of satisfying the performance obligations, offset by revenue recognized as performance obligations were completed.

Impact of recently issued accounting standards

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 the Company's fiscal year2025. The Company will include such disclosure in its Annual Report on Form10-K for the year ended* December 31, 2025.*

The Company has evaluated issued Accounting Standards Updates that havenot yet been adopted and believes the adoption of these standards willnot have a material impact on its condensed consolidated financial statements.

**NOTE4: **BUSINESS COMBINATION

Evoke Neuroscience, Inc.

On* April 30, 2025,the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Evoke Neuroscience, Inc. (“Evoke”) and stockholders of Evoke (the “Sellers”) to increase Firefly Neuroscience, Inc.'s capacity and expand its customer base. The Sellers sold and the Company purchased all of the issued and outstanding shares of Evoke, for a total purchase price consisting of: (i) $3,000 in cash (the “Cash Purchase Price”); (ii) shares of the Company’s common stock having an aggregate value of $3,000 priced at $3.50 per share (the “Shares”); and (iii) an earn-out payment in the form of additional shares of the Company’s common stock with an aggregate value of $500, contingent upon the achievement of specified revenue targets during athirty-six* (36) month earn-out period, all as further described in the Securities Purchase Agreement (the “Earn-Out Shares,” and collectively with the Cash Purchase Price and Share Consideration, the “Purchase Price”).

Each Seller agreednot to sell, transfer, or otherwise dispose of any Shares, or engage in any transaction that would transfer the economic benefits of the Shares during the Lock-Up Period (the “Lock-Up Period”) without the prior written consent of the Company. The Lock-Up Period began on the closing date and will end on the earlier of (a)six months after the closing date or (b) the effective date of a registration statement filed by the Company with the SEC covering the resale of the Shares.

In addition, if the estimated working capital is below $90 (“Minimum Working Capital Threshold”), the Purchase Price shall be reduced by the shortfall, thoughno increase would occur if the working capital exceeds the Minimum Working Capital Threshold. Additionally, $150 of the Cash Purchase Price were wired directly to Evoke to fund post-closing operational expenses (“Operational Expense Amount”), and the Operational Expense Amount shall be excluded from calculating the Closing Working Capital (as defined in the Securities Purchase Agreement), the Minimum Working Capital Threshold, and the Final Closing Statement. Within90 days after closing, the Company will provide a final closing statement with the actual figures prepared in good faith.

The transactions contemplated under the Securities Purchase Agreement were closed on* May 1, 2025,which were subject to customary closing conditions, including, without limitation, the completion of mutually satisfactory due diligence; compliance with applicable regulatory requirements; the Company entering into a satisfactory consulting agreement with David W. Hagedorn; Evoke havingno* outstanding debt or liabilities in default; the receipt of any required shareholder approvals; and the delivery of evidence of debt payoff from the Company’s loan holders.

The aggregate purchase price was $6,221, which consisted of: (a) $3,000 in cash; (b)857,142 shares of Company common stock with an acquisition date fair value of$2,743; and (c) a liability associated with the Earn-Out Shares with an acquisition date fair value of $478, subject to the conditions described above.

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The Company engaged athird-party independent valuation specialist to assist in the determination of fair values of tangible and intangible assets acquired and liabilities assumed for Evoke. The final determination of the fair value of assets and liabilities will be completed within theone-year measurement period as required by ASC805. The acquisition will necessitate the use of this measurement period to adequately analyze and assess the factors used in establishing the asset and liability fair values as of the relevant acquisition date.

The allocation of the purchase price has been prepared on a preliminary basis and changes to the allocation of certain assets and liabilities* may*occur as additional information becomes available.

The primary areas of the purchase price that arenot yet finalized are related to the valuation of, Developed technologies, Trade names, Non-compete agreements, Customer lists, Deferred revenues, and Goodwill.

In connection with the acquisition of Evoke, the Company acquired intangible assets in the form of developed technology, a trade name and non-compete agreements. The Company used the relief from royalty method when determining the fair value of the acquired trade name and developed technology. The fair value was determined by applying an estimated royalty rate to revenues, measuring the value the Company would pay in royalties to a market participant if it didnot own the trade name and developed technology and had to license it from athird party. The trade name was assigned a useful life of 3 years and the internally developed technology was assigned a useful life of 9 years. The Company used the postulated loss of income method when determining the fair value of the non-compete agreements. The non-compete agreements were assigned a contractual useful life of 5 years. Significant assumptions included a discount rate of 15%, royalty rates of 3.5% and an assumed income tax rate of 26.5%.

The fair value of working capital accounts was determined to be their carrying values due to the short-term nature of the assets and liabilities.

The contingent consideration associated with the Earn-Out Shares of $478 reflects the estimated fair value, at the acquisition date, of contingent future cash payments of up to $500 to the Sellers under an “earn-out” provision of the Securities Purchase Agreement. The Company determined the estimated acquisition date of fair value of the contingent consideration using a Monte Carlo simulation. Significant assumptions included a discount rate of 3.5% and an assumed income tax rate of 26.5% as well as projected net sales derived from internal forecasts and athree month revenue volatility rate of 1.6%.

This contingent consideration liability will be remeasured at fair value each reporting period until the contingency is resolved, with changes in fair value recognized in operating expenses. During thethree months ended* June 30, 2025,the Company recognized a loss on change in fair value of contingent consideration of $3. Significant assumptions included a discount rate of 3.6% and an assumed income tax rate of 26.5% as well as projected net sales derived from internal forecasts and athree*-month revenue volatility rate of 2.4%.

The components of working capital are as follows:

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Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and the amount is attributable to the reputation of the business acquired, the workforce in place and the synergies to be achieved from this acquisition. Goodwill of $5,175 from the acquisition of Evoke isnot expected to be deductible for income tax purposes.

The condensed consolidated financial statements of the Company include the results of operations of Evoke from* April 30, 2025to June 30, 2025and donot* include results of operations for periods prior to* April 30, 2025.The results of operations of Evoke from April 30, 2025to June 30, 2025*included revenues of $251 and a net loss of $12.

The following table presents the unaudited pro forma condensed consolidated results of operations for thethree andsix months ended* June 30, 2025and2024* as if the acquisition of Evoke occurred at the beginning of fiscal year2024. The pro forma information provided below is compiled from the preacquisition financial information of Evoke and includes pro forma adjustments to give effect to (i) amortization expense associated with the acquired intangible assets. The pro forma results arenot necessarily indicative of (i) the results of operations that would have occurred had the operations of this acquisition actually been acquired at the beginning of fiscal year2024 or (ii) future results of operations.

As of the date of the acquisition, the Company expected to collect all contractual cash flows related to receivables acquired in the acquisition. Acquisition-related costs of*$50* were expensed as incurred and are recorded within general and administrative expenses on the condensed consolidated statements of operations.

NOTE5: ACCOUNTS RECEIVABLE

Details of accounts receivable balance is as follows:

NOTE6: PREPAID EXPENSES

Details of prepaid expenses balance is as follows:

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NOTE7: INVENTORY

Details of inventory balance is as follows:

NOTE8: EQUIPMENT

Equipment balance is as follows:

Depreciation expense was $10 and $19 for thethree andsix months ended* June 30, 2025,*respectively.

Medical equipment subject to operating leases includes hardware leased to customers as part of the Company's products and services offerings.

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NOTE9: INTANGIBLE ASSETS, NET AND GOODWILL

The following tables summarize the composition of intangible assets as of* June 30, 2025:*

Amortization expense was $33 and $43 for thethree andsix months ended* June**30,* 2025, respectively.

The estimated aggregate future amortization expense for intangible assets subject to amortization as of* June**30,* 2025, is summarized below:

The following table summarizes the changes in the carrying amount of goodwill for the periods presented:

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NOTE10: 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”). The note included 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”). The principal amount of $2,400 was scheduled to mature and become due and payable on December 20, 2025.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. On* February 13, 2025,the convertible promissory note was converted to 800,000 shares of common stock at the conversion price of $3.00 per share. The derivative liability was recorded at its estimated fair value prior to its derecognition upon conversion of the associated convertible promissory notes, resulting in a loss of $9,369. The derecognition of the Conversion Option and host contract on February 13, 2025,and the corresponding issuance of 800,000 shares of common stock at a fair value of $12,368 resulted in an additional loss of $1,353 on the consolidated statement of operations for thesix* months ended* June 30, 2025.*The Company incurred $29 in transaction costs relating to the exercise of the conversion option. The following table summarizes the amortized cost portion of the convertible promissory note:

The following table summarizes the fair value changes of the Conversion Option:

NOTE11: 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 Pay Law,1963, all of the Company’s employees 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 with respect to those employees. In accordance with the Israeli Severance Pay Law,1963, severance payments, which are included in salary and employee benefits, were $11 and $22 for thethree andsix months ended* June 30, 2025,respectively, and $6 and $22 for thethree* andsix months ended* June 30, 2024,*respectively.

NOTE12: COMMITMENTS AND CONTINGENCIES

a. Royalty Commitment - Israeli Innovation Authority (“IIA”)

The Company is committed to pay royalties to the State of Israel, through the Israel Innovation Authority (“IIA”), on proceeds from sales of products in which the IIA participated by way of grants for research and development. No grants were received in the period beginning* January 1, 2024through June 30, 2025.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 at 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* June 30, 2025,and December 31, 2024.The contingent liability amounts to $5,782 and $5,833 for June 30, 2025,and December 31, 2024*respectively.

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

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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 paid a $300 commitment fee and recorded within non-current prepaid expenses and deposits. The Company incurred $36 of deferred offering costs associated with the Purchase Agreement and recorded within non-current prepaid expenses and deposits. Both the commitment fee and deferred offering costs will be charged against the gross proceeds of future sales of shares of common stock under the Purchase Agreement. 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. As of* June 30, 2025,the Company didnot* issue any shares pursuant to the Purchase Agreement.

c. Legal Proceedings

The Company is subject to various claims, complaints and legal actions in the normal course of business from time to time. After consulting with counsel, the Company isnot aware of any currently pending litigation for which it believes the outcome could have a material adverse effect on its operations or financial position.

NOTE13: EQUITY

On* February 13, 2025,convertible promissory note (Note10*) was converted to 800,000 shares of common stock at the conversion price of $3.00 per share. Transaction costs incurred of $39 relating to the exercise of the conversion option are offset within additional paid-in capital.

On* March 28, 2025,the Company entered into a private placement transaction (the “March 2025Units Offering”), pursuant to which the Company agreed to issue and sell (i)547,737 shares of common stock and (ii) warrants (the “PIPE2025* warrants”) to purchase up to 547,737 shares of common stock, at a combined purchase price of $3.00 per unit. 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. The aggregate gross proceeds from the* March 2025Units Offering were $1,643. The Company incurred $179 of costs associated with the issuance. The PIPE2025* warrants and related broker warrants are equity classified instruments and are recorded as equity.

On* April 28, 2025,the Company issued 340,000 shares of common stock pursuant to the Inducement Agreement (Note13.b*).

On* April 30,*2025, the Company issued 857,142 shares of common stock for the acquisition of Evoke (Note4). The shares were measured at fair value at $3.20 per share.

On* June 16, 2025,the Company entered into a securities purchase agreement with certain accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell 400,000 units (each, a “Unit” and collectively, the “Units”) at a purchase price of $3.00 per Unit, for aggregate gross proceeds of $1,200. Each Unit consists of (i) either (A)one share of common stock or (B) a prefunded warrant to purchaseone share of common stock (the “Pre-Funded Warrant”) at a nominal exercise price of $0.0001 per share, (ii)one common stock purchase warrant (the“$3.50* Warrant”) to purchaseone share of common stock at an exercise price of $3.50 per share, exercisable forfive years, and (iii)one common stock purchase warrant (the*“$4.00* Warrant,” and together with the Pre-Funded Warrants and*$3.50* Warrants, the “Warrants”) to purchaseone share of common stock at an exercise price of $4.00 per share, also exercisable forfive years. The Company issued 400,000 Units to the Investors, consisting of 340,000 shares of common stock,60,000 Pre-Funded Warrants,400,000 $3.50 Warrants, and 400,000 $4.00 Warrants.

The following table summarizes the Company’s warrant activity for thesix months ended* June 30, 2025:*

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During thesix months ended* June 30, 2025,the Company entered into a warrant inducement agreement (the “Inducement Agreement”) with holders (“PIPE2024* warrant holders”) of the Company's existing warrants (“PIPE2024 warrants”). Pursuant to the Inducement Agreement, PIPE2024 warrant holders agreed to exercise for cash PIPE2024 warrants to purchase up to 823,529 shares of common stock at an exercise price of $6.83. On* February 12, 2025,PIPE2024* warrants were exercised in full for cash proceeds of $5,625. The Company recorded a deemed dividend of $4,410 in relation to the Inducement Agreement as it is considered an inducement offer to exercise the PIPE2024 warrants. The fair value of a deemed dividend is estimated based on the fair value of the underlying share of common stock on the warrant exercise date. On* April 28, 2025,*the Company issued 340,000 shares of its common stock pursuant to the Inducement Agreement.

Further, the Company received proceeds of $3,200 from the exercise of Convertible Promissory Note Warrants (Note10).

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 thesix months ended* June 30, 2025:*

A summary of option activity under the Company's equity incentive plan as of* June 30, 2025,*and changes during the period then ended is presented below.

The share-based compensation expense related to options for thethree andsix months ended* June 30, 2025was $(43) and $43, respectively, and $58 and $148 for thethree* andsix months ended* June 30, 2024,respectively. The fair value of options granted for thesix* months ended* June 30, 2025and2024,* was $34 and$nil, respectively. The intrinsic value of the options outstanding as of* June 30, 2025,is$nil ( December 31, 2024:*$nil).

The fair value of each option award is estimated on the date of grant using a Black Scholes pricing option valuation model that uses the assumptions noted in the following table.

A summary of the Company’s nonvested options as of* June 30, 2025,and changes during thesix* months period ended, is presented below.

As of* June 30, 2025,*there was $119 of total unrecognized compensation cost related to nonvested options granted to be recognized over the next 1.75 years.

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A summary of RSU activity under the Company's equity incentive plan as of* June**30,* 2025, and changes during the period then ended is presented below.

The share-based compensation expense related to RSUs for thethree andsix months ended* June 30, 2025was $70 and $71, respectively, and$nil for thethree* andsix months ended* June 30, 2024,respectively. The fair value of RSUs granted for thesix* months ended* June**30,* 2025, and2024, was $1,051 and$nil, respectively.

The fair value of each RSU is estimated based on grant-date fair value of the underlying share of common stock.

A summary of the Company’s nonvested RSUs as of* June 30, 2025,and changes during thesix* months period ended, is presented below.

As of* June 30, 2025,*there was $980 of total unrecognized compensation cost related to nonvested RSUs granted. That cost is expected to be recognized over a weighted-average period of 2.87 years.

A summary of DSU activity under the Company's equity incentive plan as of* June 30, 2025,*and changes during the period then ended is presented below.

The share-based compensation expense related to DSUs for thethree andsix months ended* June 30, 2025was $50 and $167, respectively, and$nil for thethree* andsix months ended* June 30, 2024,respectively. The fair value of DSUs granted for thesix* months ended* June 30, 2025,and2024,* was $209 and$nil, respectively.

The fair value of each DSU is estimated based on grant-date fair value of the underlying share of common stock.

A summary of the Company’s nonvested DSUs as of* June 30, 2025,and changes during thesix* months period ended, is presented below.

As of* June 30, 2025,*there was $41 of total unrecognized compensation cost related to nonvested DSUs granted. That cost is expected to be recognized over a weighted-average period of 0.25 years.

NOTE14: 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 period 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.

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 of* June**30,* 2025, potential dilutive shares of common stock consist of shares issuable upon exercise of stock options, warrants, RSUs and DSUs.No adjustments have been made to the weighted average outstanding shares of common stock figures for thethree andsix months ended* June 30, 2025,or2024,* as the assumed conversion would be anti-dilutive.

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The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share, as such shares would have had an anti-dilutive effect:

For the purposes of the computation of basic and diluted net loss per share, an amount recognized as a deemed dividend reduced net loss available to common stockholders in a manner similar to the application of thetwo-class method. The net loss available to common stockholders was adjusted by the deemed dividend associated with the Inducement Agreement (Note13.b).

NOTE15: REVENUE, NET

NOTE16: SEGMENT REPORTING

The Company hasone reportable segment managed on a consolidated basis: Firefly products. 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.

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