Firefly Neuroscience, Inc 10-Q for FY2025 Q3
Firefly Neuroscience, Inc. (AIFF)
About this 10-Q
Firefly Neuroscience, Inc filed this 10-Q on November 12, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $388K
- up 1075.8% from $33K a year earlier
- Net loss
- $2.64M
- compared with a net loss of $4.29M a year earlier
- Diluted EPS
- -$0.20
- compared with -$0.61 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
FOR THE QUARTERLY PERIOD ENDED
FOR THE TRANSITION PERIOD FROM _________ TO _________
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As of November 6, 2025, there were a total of
FIREFLY NEUROSCIENCE, INC.
Quarterly Report on Form 10-Q
Period Ended September 30, 2025
TABLE OF CONTENTS
i
Part I.
Financial Information
Item 1. Financial Statements.
FIREFLY NEUROSCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2025 AND DECEMBER 31, 2024
(IN THOUSANDS, EXCEPT SHARE DATA)
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Other receivables | ||||||||
| Prepaid expenses | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| Non current assets | ||||||||
| Prepaid expenses | ||||||||
| Equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total non current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Trade payables | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Convertible promissory note, net of unamortized discount | ||||||||
| Deemed dividend liability | ||||||||
| Contingent consideration payable | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| Non current liabilities | ||||||||
| Deferred revenue | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 12) | ||||||||
| SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred shares, $ | ||||||||
| Common shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
FIREFLY NEUROSCIENCE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| COST OF GOODS SOLD | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administration expenses | ||||||||||||||||
| Impairment of intangible assets | ||||||||||||||||
| TOTAL OPERATING EXPENSES | ||||||||||||||||
| OPERATING LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest and bank fees | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Unrealized gain (loss) on foreign exchange | ( | ) | ( | ) | ||||||||||||
| Change in derivative fair value | ( | ) | ||||||||||||||
| Loss on settlement | ( | ) | ||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ( | ) | ||||||||||
| LOSS BEFORE INCOME TAX | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision | ||||||||||||||||
| NET LOSS AND COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Deemed dividend on warrant inducement | ( | ) | ||||||||||||||
| NET LOSS AND COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| BASIC AND DILUTED LOSS PER SHARE | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
FIREFLY NEUROSCIENCE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
SEPTEMBER 30, 2025 AND 2024
(IN THOUSANDS, EXCEPT SHARE DATA)
| Preferred stock | Common stock | Total | ||||||||||||||||||||||||||||||||||
| Number of | Number of | Additional | Shareholder’s | |||||||||||||||||||||||||||||||||
| Number of | shares to | Number of | shares to | paid-in | Accumulated | equity | ||||||||||||||||||||||||||||||
| shares | be issued | Amount | shares | be issued | Amount | capital | deficit | (deficit) | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Private placement, net of issuance costs | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issued - warrants exercised | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issued for conversion of Convertible Promissory Note | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issues for consulting services | - | - | - | |||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||||||
| Deemed dividend on warrant inducement | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Private placement, net of issuance costs | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issued for debt | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issued for Evoke acquisition | - | - | - | |||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | |||||||||||||||||||||||||||||||||
| Deemed dividend on warrant inducement | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Private placement, net of issuance costs | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Shares issued - warrants exercised | - | - | - | |||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2025 | - | - | $ | - | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 | ( | ) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Series B Preferred Stock conversion | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Series C Preferred Stock Units offering | - | - | - | |||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2024 | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Series B Preferred Stock conversion | - | - | - | - | ||||||||||||||||||||||||||||||||
| Series C Preferred Stock Units offering | ( | ) | - | - | - | |||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Share exchange: former shareholders of WaveDancer | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Series C Preferred Stock Units offering | ( | ) | - | - | ||||||||||||||||||||||||||||||||
| Private placement net of issuance costs | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issued for debt | - | - | - | |||||||||||||||||||||||||||||||||
| shares issued for future settlement of debt | - | - | - | |||||||||||||||||||||||||||||||||
| shares issued for consulting services | - | - | - | |||||||||||||||||||||||||||||||||
| shares issued for prepaid services | - | - | - | |||||||||||||||||||||||||||||||||
| shares issued - stock options, warrants, and RSU exercises | - | - | - | |||||||||||||||||||||||||||||||||
| Share Based Compensation Expense | - | - | - | - | ||||||||||||||||||||||||||||||||
| Unvested shares issued to directors | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2024 | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
FIREFLY NEUROSCIENCE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(IN THOUSANDS)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Impairment of intangible asset | ||||||||
| Share-based compensation expense | ||||||||
| Accretion expense on convertible promissory note | ||||||||
| Change in derivative fair value | ||||||||
| Loss on settlement of convertible promissory note | ||||||||
| Loss on shares issued for debt | ||||||||
| Expense recognized from prepaid credits used originally issued with shares | ||||||||
| Shares issued for consulting services | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Change in receivables | ( | ) | ( | ) | ||||
| Change in prepaid expenses | ( | ) | ||||||
| Change in inventory | ( | ) | ||||||
| Change in trade payables | ( | ) | ||||||
| Change in accrued liabilities | ( | ) | ( | ) | ||||
| Change in deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisition of new business, net of cash acquired | ( | ) | ||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Product enhancement – intangible asset | ( | ) | ||||||
| Proceeds from recapitalization transaction | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of shares, net of issuance costs | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| BALANCE OF CASH AT THE BEGINNING OF PERIOD | ||||||||
| BALANCE OF CASH AT THE END OF PERIOD | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | ||||||||
| Cash paid for income taxes | ||||||||
| Non-cash investing and financing activities | ||||||||
| Deemed issuance of common shares to former shareholders’ of WaveDancer | ||||||||
| Share issuance for prepaid services | ||||||||
| Shares issued for conversion of the convertible promissory note | ||||||||
| Deemed dividend on warrant inducement | ||||||||
| Shares issued for debt | ||||||||
| Shares issued for Acquisition of new business | ||||||||
| Non-cash acquisition of equipment | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
FIREFLY NEUROSCIENCE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1: BUSINESS DESCRIPTION
Overview
Firefly Neuroscience, Inc. (formerly WaveDancer, Inc.), a Delaware corporation, and its wholly owned subsidiaries Firefly Neuroscience 2023, Inc., a Delaware corporation (formerly known as Firefly Neuroscience, Inc.), Firefly Neuroscience Ltd., an Israeli corporation (formerly known as Elminda Ltd.), Elminda 2022 Inc., a Delaware corporation (formerly known as Elminda Inc.), Firefly Neurosciences Canada Inc., a Canadian corporation, and Elminda Canada Inc., a Canadian corporation (collectively, the “Company”), are engaged in the development, marketing and distribution of medical devices and technology allowing high resolution visualization and evaluation of the complex neuro-physiological interconnections of the human brain.
On November 15, 2023, we entered into the Agreement and Plan of Merger (as amended, the “Merger Agreement”) with WaveDancer and FFN Merger Sub, Inc. (“Merger Sub”), pursuant to which, among other things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub merged with and into Private Firefly, with Private Firefly becoming a wholly-owned subsidiary of WaveDancer and the surviving corporation of the merger (the “Merger”). On August 12, 2024, the Merger closed, and on August 13, 2024, we began trading on the Nasdaq Capital Market under the ticker symbol “AIFF.”
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.
NOTE 2: GOING CONCERN
As of September 30, 2025, the Company had an accumulated deficit of
$
Management of the Company has a reasonable expectation that the Company can continue raising additional capital to continue in operational existence for the foreseeable future. Ability to raise additional funds will depend on, among other factors, financial, economic and market conditions, many of which are outside of our control and there can be no assurance that the Company will be able to obtain additional funding on satisfactory terms or at all.
NOTE 3: 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 United States of America (“U.S. GAAP”).
The results reported in these unaudited condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be 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 Form 10-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
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.
5
Significant accounting policies
Apart from Business Combinations, Goodwill, Intangible Assets, and Inventory as described below, there have been no 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 expected to be paid upon achievement of negotiated milestones are recognized at the acquisition date as part of the fair value transferred in exchange for the acquired business. Contingent consideration arrangements are remeasured at fair value at each reporting period until settled or expiration of the arrangement. Examples of critical estimates in valuing certain of the intangible assets acquired include, but are not limited to, future expected cash inflows and outflows, 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 may be impaired. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than it 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 may apply a one-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 weighs 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 than not 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 may be 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 do not 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 cost or net realizable value. Cost is determined using the first-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 September 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 ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company performs the following five steps:
| (i) | identify the contract(s) with a customer, | |
| (ii) | identify the performance obligations in the contract, | |
| (iii) | determine the transaction price, | |
| (iv) | allocate the transaction price to the performance obligations in the contract, and | |
| (v) | recognize revenue when (or as) the entity satisfies a performance obligation. |
6
The Company applies this five-step model to arrangements that meet the definition of a contract under ASC 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company evaluates the goods or services promised within each contract, related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied at a point in time.
The Company’s revenues are measured based on the considerations specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities. For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. The Company regularly reviews standalone selling prices and updates these estimates, as necessary.
The Company offerings are assessed to determine whether an embedded lease arrangement exists. The Company identifies certain contracts to be within the scope of ASC 842 and ASC 606. For contracts that are in the scope of both ASC 842 and ASC 606, and in which the lease component is an operating lease, the Company applies the practical expedient in ASC 842 to combine the lease component and non-lease components, and to account for the combined components as a single lease component. Accordingly, the Company accounts for the monthly payments as lease revenue.
Deferred revenue
Deferred revenue consists of payments received from customers in advance of satisfying a performance obligation identified in accordance with ASC 606. The change in the deferred revenue balance as of September 30, 2025 and December 31, 2024 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 ASU 2023-09 “Income Taxes (Topics 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate of reconciliation and income taxes paid. ASU 2023-09 is effective for the Company’s fiscal year 2025. The Company will include such disclosure in its Annual Report on Form 10-K for the year ended December 31, 2025.
The Company has evaluated issued Accounting Standards Updates that have not yet been adopted and believes the adoption of these standards will not have a material impact on its condensed consolidated financial statements.
NOTE 4: 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) $
Each Seller agreed not 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. The Lock-Up Period expired on October 31, 2025.
7
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 the former CEO of Evoke; Evoke having no 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 $
The Company engaged a third-party independent valuation specialist to assist in the determination of fair values of intangible assets acquired and liabilities assumed for Evoke. The final determination of the fair value of assets and liabilities will be completed within the one-year measurement period as required by ASC 805. 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 are not yet finalized are related to the valuation of, Developed technologies, Trade names, Non-compete agreements, Customer lists, Deferred revenues, and Goodwill.
| Purchase Price | ||||
| Allocation | ||||
| Purchase Consideration: | ||||
| Cash | $ | |||
| Common stock | ||||
| Earn-Out Shares | ||||
| Total Purchase Consideration | $ | |||
| Less: | ||||
| Developed technology | $ | |||
| Trade name | ||||
| Non-compete agreements | ||||
| Working capital | ||||
| Security deposit | ||||
| Deferred revenue, non-current portion | ( | ) | ||
| Fair Value of Identified Net Assets | $ | |||
| 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
did not own the trade name and developed technology and had to license it from a third party. The trade name was assigned a useful
life of
The fair value of working capital accounts was determined to be their carrying value due to the short-term nature of the assets and liabilities.
The contingent consideration associated with the Earn-Out Shares
of $
This contingent consideration of liability will be remeasured at fair
value for each reporting period until the contingency is resolved, with changes in fair value recognized in operating expenses. During
the nine months ended September 30, 2025, the Company recognized a loss on change in fair value of contingent consideration of $
8
The components of working capital as of the acquisition date are as follows:
| Current assets: | ||||
| Cash | $ | |||
| Accounts receivable, net | ||||
| Inventory | ||||
| Total current assets | $ | |||
| Less current liabilities: | ||||
| Accounts payable | $ | |||
| Accrued expenses and other current liabilities | ||||
| Deferred revenue | ||||
| Total current liabilities | $ | |||
| Net working capital | $ | |||
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 $
The condensed consolidated financial statements of the Company include
the results of operations of Evoke from April 30, 2025 to September 30, 2025 and do not include results of operations for periods prior
to April 30, 2025. The results of operations of Evoke from April 30, 2025 to September 30, 2025 included revenues of $
The following table presents the unaudited pro forma condensed consolidated
results of operations for the three and nine months ended September 30, 2025 and 2024 as if the acquisition of Evoke occurred at
the beginning of fiscal year 2024. 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.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
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.
NOTE 5: ACCOUNTS RECEIVABLE
Details of accounts receivable balance is as follows:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Allowance for expected credit losses | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
9
NOTE 6: PREPAID EXPENSES
Details of prepaid expenses balance is as follows:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Shares issued for prepaid services | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total (current) | $ | $ | ||||||
| Shares issued for prepaid services | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total (non-current) | $ | $ | ||||||
NOTE 7: INVENTORY
Details of inventory balance is as follows:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Raw Materials | $ | $ | ||||||
| Work In Process | ||||||||
| Finished Goods | ||||||||
| Total (current) | $ | $ | ||||||
NOTE 8: EQUIPMENT
Equipment balance is as follows:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Medical equipment, cost | $ | $ | ||||||
| Medical equipment subject to operating leases, cost | ||||||||
| Less – accumulated depreciation | ( | ) | ( | ) | ||||
| Equipment, net | $ | $ | ||||||
Depreciation expenses were $
Medical equipment subject to operating leases includes hardware leased to customers as part of the Company’s products and services offerings.
10
NOTE 9: INTANGIBLE ASSETS, NET AND GOODWILL
The following tables summarize the composition of intangible assets as of September 30, 2025:
| September 30, 2025 | ||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Accumulated Impairment | Net Carrying Amount | Weighted Average Life | ||||||||||||||||
| Finite lived intangible assets | ||||||||||||||||||||
| BNA software | $ | $ | ( | ) | ( | ) | $ | |||||||||||||
| Developed technology | ( | ) | ||||||||||||||||||
| Trade names | ( | ) | ||||||||||||||||||
| Non-compete agreements | ( | ) | ||||||||||||||||||
| Total intangible assets | $ | $ | ( | ) | ( | ) | $ | |||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Accumulated Impairment | Net Carrying Amount | Weighted Average Life | ||||||||||||||||
| Finite lived intangible assets | ||||||||||||||||||||
| BNA software | $ | $ | ( | ) | ( | ) | $ | |||||||||||||
| Total intangible assets | $ | $ | ( | ) | ( | ) | $ | |||||||||||||
Amortization expense was $
During the reporting period, management evaluated the Company’s capitalized software development costs for indicators of impairment in accordance with ASC 350-40, Internal-Use Software. The review was prompted by a change in strategic direction resulting from the acquisition of Evoke Neuroscience and its hardware offering.
Accordingly, the Company recognized an impairment loss of $
The estimated aggregate future amortization expense for intangible assets subject to amortization as of September 30, 2025, is summarized below:
| Estimated Future Amortization Expense | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 and therafter | ||||
| Total | $ | |||
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NOTE 10: CONVERTIBLE PROMISSORY NOTE
On December 20, 2024, the Company issued a convertible promissory note
of $
| Balance at December 31, 2023 | $ | |||
| Convertible promissory note proceeds, net of transaction costs | ||||
| Allocation to warrants, net of transaction costs | ( | ) | ||
| Allocation to Conversion Option, at fair value including transaction costs | ( | ) | ||
| Interest and accretion | ||||
| Balance at December 31, 2024 | $ | |||
| Interest and accretion | ||||
| Settlement via conversion | ( | ) | ||
| Balance at September 30, 2025 | $ |
The following table summarizes the fair value changes of the Conversion Option:
| Balance at December 31, 2023 | $ | |||
| Allocation to Conversion Option, at fair value | ||||
| Change in derivative fair value | ||||
| Balance at December 31, 2024 | $ | |||
| Change in derivative fair value | ||||
| Settlement via conversion | ( | ) | ||
| Balance at September 30, 2025 | $ |
NOTE 11: LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT
Israeli labor law requires payment of severance pay upon dismissal
of an employee or upon termination of employment in certain circumstances. Pursuant to Section 14 of the Israeli Severance Pay Law, 1963,
all of the Company’s employees are entitled to monthly deposits, at a rate of
NOTE 12: 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. grants were received in the period beginning January 1, 2024 through September 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
Sale of the technology developed utilizing the grants from IIA is restricted and is subject to IIA’s approval.
12
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 $
On September 4, 2025, the Company sent notification for termination of the Purchase Agreement and as such expensed the commitment fee and deferred offering costs. There were no sales of stock under 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 is not aware of any currently pending litigation for which it believes the outcome could have a material adverse effect on its operations or financial position.
NOTE 13: EQUITY
a. Shares
On February 13, 2025, convertible promissory note (Note 10) was converted
to
On March 28, 2025, the Company entered into a private placement transaction
(the “March 2025 Units Offering”), pursuant to which the Company agreed to issue and sell (i)
On April 28, 2025, the Company issued
On April 30, 2025, the Company issued
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
b. Warrants
The following table summarizes the Company’s warrant activity for the nine months ended September 30, 2025:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | ||||||||||
| Outstanding warrants, January 1, 2025 | $ | |||||||||||
| PIPE 2025 warrants | ||||||||||||
| PIPE 2025 broker warrants | ||||||||||||
| $3.50 Warrants | ||||||||||||
| $4.00 Warrants | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Warrants Expired | ( | ) | ||||||||||
| Outstanding warrants, September 30, 2025 | $ | |||||||||||
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During the nine months ended September 30, 2025, the Company entered
into a warrant inducement agreement (the “Inducement Agreement”) with holders (“PIPE 2024 warrant holders”) of
the Company’s existing warrants (“PIPE 2024 warrants”). Pursuant to the Inducement Agreement, PIPE 2024 warrant holders agreed
to exercise for cash PIPE 2024 warrants to purchase up to
Further, the Company received proceeds of $
c. Warrants exercisable for little or no consideration
Warrants exercisable for little or no consideration are fully vested
warrants that allow the holders to acquire a specified number of the issuer’s shares at a nominal exercise price.
| Number of Warrants | Weighted Average Remaining Life (Years) | |||||||
| Outstanding warrants, January 1, 2025 | ||||||||
| Pre-Funded Warrants (Note 13.a) | ||||||||
| Exercised | ( | ) | ||||||
| Expired | ( | ) | ||||||
| Outstanding warrants, September 30, 2025 | ||||||||
d. Employees stock option plan
A summary of option activity under the Company’s equity incentive plan as of September 30, 2025, and changes during the period then ended is presented below.
| Number of Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding Options, December 31, 2024 | $ | $ | - | |||||||||||||
| Options granted | - | - | ||||||||||||||
| Options forfeited | ( | ) | - | - | ||||||||||||
| Outstanding Options, September 30, 2025 | $ | $ | - | |||||||||||||
The share-based compensation expense related to options for the
three and nine months ended September 30, 2025 was $
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.
| 2025 | ||||
| Risk free rate | % | |||
| Dividend yield | % | |||
| Expected volatility | % | |||
| Expected term (in years) | ||||
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A summary of the Company’s nonvested options as of September 30, 2025, and changes during the nine-month period ended, is presented below.
| Number of Stock Options | Weighted Average Grant-Date Fair Value | |||||||
| Non-Vested Options, December 31, 2024 | $ | |||||||
| Options granted | ||||||||
| Options vested | ( | ) | ||||||
| Options forfeited | ( | ) | ||||||
| Non-Vested Options, September 30, 2025 | $ | |||||||
As of September 30, 2025, there was $
e. Restricted share units (“RSUs”)
A summary of RSU activity under the Company’s equity incentive plan as of September 30, 2025, and changes during the period ended is presented below.
| Number of Stock RSUs | Aggregate Intrinsic Value | |||||||
| Outstanding, December 31, 2024 | $ | |||||||
| RSUs granted | - | |||||||
| RSUs exercised | ( | ) | - | |||||
| Outstanding, September 30, 2025 | $ | |||||||
The share-based compensation expense related to RSUs for the
three and nine months ended September 30, 2025 was $
The fair value of each RSU is estimated based on the grant-date fair value of the underlying share of common stock.
A summary of the Company’s nonvested RSUs as of September 30, 2025, and changes during the nine-month period ended, is presented below.
| Number of Stock RSUs | Weighted Average Grant-Date Fair Value | |||||||
| Non-vested RSUs, December 31, 2024 | $ | |||||||
| RSUs granted | ||||||||
| RSUs vested | ( | ) | ||||||
| Non-vested RSUs, September 30, 2025 | $ | |||||||
As of September 30, 2025, there was $
f. Deferred stock units (“DSUs”)
A summary of DSU activity under the Company’s equity incentive plan as of September 30, 2025, and changes during the period ended, is presented below.
| Number of Deferred Stock Units | Aggregate Intrinsic Value | |||||||
| Outstanding DSUs, December 31, 2024 | $ | |||||||
| DSUs granted | - | |||||||
| Outstanding DSUs, September 30, 2025 | $ | |||||||
The share-based compensation expense related to DSUs for the three
and nine months ended September 30, 2025 was $
The fair value of each DSU is estimated based on the grant-date fair value of the underlying share of common stock.
15
A summary of the Company’s nonvested DSUs as of September 30, 2025, and changes during the nine-month period ended, is presented below.
| Number of Stock RSUs | Weighted Average Grant-Date Fair Value | |||||||
| Non-vested DSUs, December 31, 2024 | $ | |||||||
| DSUs granted | ||||||||
| DSUs vested | ( | ) | ||||||
| Non-vested DSUs, September 30, 2025 | - | $ | - | |||||
As of September 30, 2025, there was $ of total unrecognized compensation cost related to nonvested DSUs granted. The costs have been recognized as of September 30, 2025.
NOTE 14: 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 or no consideration in relation to the share price. Shares of common stock that were issued and are subject to vesting conditions are not considered outstanding during the requisite service period.
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 September 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 the three and nine months ended September 30, 2025, or 2024, as the assumed conversion would be anti-dilutive.
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:
| 2025 | 2024 | |||||||
| Warrants (Note 13.b) | ||||||||
| Stock options (Note 13.d) | ||||||||
| Unvested RSUs (Note 13.e) | ||||||||
| Unvested DSUs (Note 13.f) | ||||||||
| Shares issuable pursuant to Series C Preferred Stock | ||||||||
| Total | ||||||||
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 the two-class method. The net loss available to common stockholders was adjusted by the deemed dividend associated with the Inducement Agreement (Note 13.b).
16
NOTE 15: REVENUE, NET
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Type of goods and services | ||||||||||||||||
| Service | $ | $ | $ | $ | ||||||||||||
| Rentals | ||||||||||||||||
| Product sales | ||||||||||||||||
| Other miscellaneous products | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Timing of recognition of revenue | ||||||||||||||||
| Point in time | ||||||||||||||||
| Over time | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| Deferred revenue - beginning of period | $ | $ | ||||||
| Acquired in Evoke business combination | ||||||||
| Increases due to consideration received from customers | ||||||||
| Revenue recognized | ( | ) | ||||||
| Deferred revenue - end of period | $ | $ | ||||||
NOTE 16: SEGMENT REPORTING
The Company has 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 our customer arrangements is based on a single software platform that is deployed to and implemented by customers in a similar manner. The service term for the software arrangements is variable. The Company does not have intra-entity sales or transfers.
NOTE 17. SUBSEQUENT EVENT
On October 28, 2025, the Company issued DSUs representing
The service-based vesting condition for these awards are satisfied
over
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The information set forth below should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in the Form 10-Q as well as the audited consolidated financial statements and the notes thereto contained in our Annual Report on 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 3, 2025. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,” “we,” “our,” or our “Company” and similar terms refer to Firefly Neuroscience, Inc., a Delaware corporation and its subsidiaries. All amounts are disclosed in thousands, except share and per share amounts and price.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Form 10-Q may constitute “forward-looking statements” for purposes of the federal securities laws and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that look to future events and include, but are not limited to, statements regarding our business strategy, plans and objectives; anticipated future operating results and operating expenses, cash flows, capital resources, and liquidity; trends, opportunities and risks affecting our business, industry and financial results; the expected benefits of use of our solutions; future expansion or growth plans and potential for future growth; our business prospects; our systems and technology, future profitability; the sufficiency of our existing cash and cash equivalents to meet our working capital and capital expenditure needs over the next twelve months; acquisitions; and our expectations or beliefs concerning future events. In addition, the words “anticipates,” “appear,” “approximate,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, and many of which are outside of our control. Therefore, you should not place undue reliance on these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
| ● | fluctuation and volatility in market price of our common stock due to market and industry factors, as well as general economic, political and market conditions; |
| ● | our ability to continue as a going concern; |
| ● | the impact of dilution on our stockholders, including through the issuance of additional equity securities in the future; |
| ● | our ability to realize the intended benefits of the Merger; | |
| ● | our ability to realize the intended benefits of the Acquisition; |
| ● | the impact of our ability to realize the anticipated tax impact of the Merger; |
| ● | the outcome of litigation or other proceedings may become subject to in the future; |
| ● | delisting of our common stock from the Nasdaq Capital Market (“Nasdaq”) or the failure for an active trading market to develop; |
| ● | the failure of our altered business operations, strategies and focus to result in an improvement for the value of our common stock; |
| ● | the availability of and our ability to continue to obtain sufficient funding to conduct planned operations and realize potential profits; |
| ● | our limited operating history; |
| ● | the impact of the complexity of the regulatory landscape on our ability to seek and obtain regulatory approval for our products, both within and outside of the U.S.; |
| ● | challenges that we may face with maintaining regulatory approval; |
| ● | the impact of the concentration of capital stock ownership with our insiders on stockholders’ ability to influence corporate matters. |
| ● | the impacts of future acquisitions of businesses or products and the potential to fail to realize intended benefits of such acquisition; |
| ● | the potential impact of changes in the legal and regulatory landscape, both within and outside of the U.S.; |
| ● | our dependence on third parties; |
| ● | challenges we may face with respect to our products achieving market acceptance; |
| ● | the impact of pricing of our products; |
18
| ● | our ability to obtain, maintain and protect its trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on its proprietary rights; |
| ● | our ability to maintain adequate cyber security and information systems; |
| ● | our ability to generate sufficient revenue to achieve and sustain profitability; |
| ● | the risk that our significant increased expenses and administrative burdens as a public company could have an adverse effect on our business, financial condition and results of operations; and |
| ● | the other factors set forth in the “Risk Factors” section of this Form 10-Q and our other documents filed with the SEC under the heading “Risk Factors.” |
These forward-looking statements are based on information available as of the date of this Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on April 3, 2025 (the “2024 Annual Report”). If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events or information as of the date on which the statements are made in this Quarterly Report on Form 10-Q. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Overview
We are an Artificial Intelligence (“AI”) technology company developing innovative neuroscientific solutions with goals to improve brain health outcomes for patients with mental illnesses and neurological disorders. Our FDA-510(k) cleared BNA™, or Brain Network Analytics, is an advanced neurophysiological assessment tool that uses AI and machine learning to analyze EEG data recorded during rest and cognitive activity. In addition, the Evox System is FDA-510(k) cleared, and is intended for the acquisition, display, and storage, of electrical activity of a patient’s brain including electroencephalograph (EEG) and event-related potentials (ERP) obtained by placing two or more electrodes on the head to aid in diagnosis. Our products may enhance neurological assessments by providing objective, data-driven insights that allow for the early and longitudinal detection of neurophysiological deviations. These insights into brainwave patterns underlying cognitive function may help in tailoring personalized treatment plans and improving patient outcomes more effectively than traditional EEG analysis.
As of the date of this filing, our products are in market. We believe there is further potential for such commercialization, both with respect to pharmaceutical companies in their drug research and clinical trial activities, as well as medical practitioners in their clinics. In concert with the further commercialization of our products, we are collaborating with neuroscience drug development companies to support their clinical strategies. We plan to generate revenue through the use of our products by United States healthcare professionals and through collaborations with pharmaceutical companies in support of neuroscience drug development. The proposed business model for healthcare provider clinics consists of a base service fee for licensing the product and a per use fee based on volume. The proposed business model for pharmaceutical companies will be tailored to each customer based on the volume and costs associated with providing such services. In order to further grow our products in the medical community, the company has hired sales staff and plans to continue marketing efforts to secure new accounts. The company will continue to focus on targeted outreach and client engagement in the clinics segment. Using its database of potential customers, the company will identify key targets in select markets and connect with them through personalized emails and calls to schedule meetings with decision-makers. The sales team, equipped with marketing materials, case studies, peer-reviewed publications, and knowledge gained from our current research partners, are focused on presenting the benefits of our products and practical applications during these meetings. Follow-up efforts, including addressing questions and offering support by our scientific team, will aim to build strong client relationships and drive adoption of the platform.
The clinical utility of EEG technology to support better outcomes for patients with mental illnesses and cognitive disorders has been well documented. Historically, clinical adoption of EEG by medical professionals, including psychiatrists, neurologists, nurse practitioners and general practitioners, we believe has been limited due to the complexity of interpreting EEG recordings and the inability to practically compare a patient’s brain function to that of a clinically normal age-matched patient. Firefly believes that without defining a standard deviation to the norm, it is not possible to objectively assess brain function. By establishing an objective baseline measurement of brain function, our products enable clinicians to optimize patient care, leading to improved outcomes for people suffering from mental illnesses and cognitive disorders.
19
Our value proposition is supported by the real-world use of our products. Incorporating our products as part of a patient management protocol demonstrated improved response rates, enhanced therapy compliance, reduced non-responder rates, and a reduction in need for medication switching among patients. Further, we believe that our extensive clinical database, when combined with advanced AI, provides the opportunity to identify clinically relevant biomarkers that will support better patient outcomes through precision medicine and companion diagnostics. We expect to gather additional data through the clinical deployments and clinical studies conducted by drug companies. This additional data may allow us to discover new biomarkers and objectively measure the impact of therapeutic interventions on patients of different types, further enhancing our platform’s effectiveness. We believe that we will be able to enhance accurate diagnosis and predict what therapy or drug, or a combination thereof, may be best suited to optimize patient outcomes. This represents a paradigm shift in how clinicians manage patients with mental illnesses and cognitive disorders, holding the potential to transform brain health.
Recent Developments
June 2025 Units Offering
On June 16, 2025, we entered into a securities purchase agreement (“the June 2025 Purchase Agreement”) with the Investors, pursuant to which we issued and sold 400,000 of Units, at a purchase price of $3.00 per June 2025 Unit. Each Unit consists of (i) either (A) one share of common stock, or (B) a prefunded warrant to purchase one share of common stock at a nominal exercise price of $0.0001 per share, to the extent that acquiring the shares of common stock instead of the Pre-Funded Warrant would have caused the investors to own in excess of 4.99% of the outstanding common stock on a post-issuance basis; (ii) one common stock purchase warrant to purchase one share of common stock over five (5) years at an exercise price of $3.50 per share; and (iii) one common stock purchase warrant to purchase one share of common stock over five (5) years at an exercise price of $4.00 per share. The Prefunded Warrant, the $3.50 Warrant and the $4.00 Warrant include a beneficial ownership limitation, which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise any portion of the warrants, to the extent that, after giving effect to such exercise, the holder (together with the holder’s affiliates) would beneficially own more than 4.99% of the outstanding shares of common stock immediately after the issuance of the common stock issuable upon exercise. On the same date, the closing under the June 2025 Purchase Agreement occurred, and the Company issued 400,000 Units to investors at a total purchase price of $1,200.
Acquisition
On April 30, 2025, we acquired all outstanding stock of Evoke, a privately held company which provides customers with a package of hardware and software to measure the electrical activity of the brain. The consideration transferred of approximately $6,000 and consists of $3,000 in cash and 857,142 shares of our common stock valued at $3.50 per share.
March 2025 Units Offering
On March 28, 2025, we entered into the private placement subscription agreement (the “Subscription Agreement”) with the subscribers (“Subscribers”), pursuant to which we issued and sold 547,737 of units (each “March 2025 Unit”, and collectively, the “March 2025 Units”), at a purchase price of $3.00 per Unit. Each March 2025 Unit consists of (i) either (A) one share of common stock or (B) a prefunded warrant to purchase common stock to the extent that acquiring the shares of common stock instead of such prefunded warrants would have caused the Subscriber to own in excess of 4.99% of the shares of outstanding common stock on a post-issuance basis and (ii) one common stock purchase warrant to purchase common stock over thirty-six (36) months at an exercise price of $4.00 per share. On the same date, the closing under the Subscription Agreement occurred, and we issued the March 2025 Units to the Subscribers.
The prefunded warrants have a nominal exercise price of $0.0001 (subject to standard adjustments for stock splits, stock dividends, recapitalizations, mergers and similar transactions) and may be exercised on a cashless basis. The prefunded warrants also contain a beneficial ownership limitation which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise, any portion of a prefunded to the extent that, after giving effect to the exercise, such holder (together with such holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the exercise. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.
In connection with the March 2025 Units Offering, we entered into a finder’s fee agreement with Canaccord Genuity Corp. (“Canaccord”), pursuant to which the Company paid Canaccord at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Canaccord, paid in cash; and (ii) the issuance of the Finder’s Warrant to Canaccord of up to 7.5% of the Units subscribed for by person introduced to the Company by Canaccord. Each Finder’s Warrant is exercisable to purchase one additional common stock at $4.00 per share for a period of 36 months from the closing of the March 2025 Units Offering.
In connection with the March 2025 Units Offering, we entered into a finder’s fee agreement with Research Capital Corporation (“Research Capital”), pursuant to which the Company paid Research Capital at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Research Capital, paid in cash; and (ii) the issuance of the Finder’s Warrant of the Company to Research Capital of up to 7.5% of the March 2025 Units subscribed for by person introduced to the Company by Research Capital. Each Finder’s Warrant is exercisable to purchase one additional common stock at $3.00 per share for a period of 3 years from the date of issuance of such Finder’s Warrant.
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Reverse Merger with WaveDancer
On November 15, 2023, we entered into the Agreement and Plan of Merger (as amended, the “Merger Agreement”) with WaveDancer and FFN Merger Sub, Inc. (“Merger Sub”), pursuant to which, among other things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub merged with and into Private Firefly, with Private Firefly becoming a wholly-owned subsidiary of WaveDancer and the surviving corporation of the merger (the “Merger”). On August 12, 2024, the Merger closed, and on August 13, 2024, we began trading on the Nasdaq Capital Market under the ticker symbol “AIFF.”
Warrants Exercises
During the week of February 21, 2025, we received total proceeds of $8,825 from the exercise of warrants to purchase 823,530 shares of the common stock, at an exercise price of $6.83, and warrants to purchase 800,000 shares of commons stock, at an exercise price of $4.00, respectively. The warrants were issued pursuant to private placements that closed on August 12, 2024, and December 20, 2024, and no new warrants were issued by the Company as a result of the exercises.
Financial Operations Overview
Revenue
Revenue consists of equipment sales, equipment rentals, per-use fees, and the undertaking of projects and/or clinical studies. In the future, we plan to generate revenue through two segments: through the use of our products by healthcare professionals in the United States and through collaborations with pharmaceutical companies in support of neuroscience drug development.
Operating Expense
Costs of goods sold
Cost of goods sold consists of product manufacturing expenses related to the Evoke and Versus products acquired in the Evoke transaction.
Research and Development Expense
Research and development expenses represent costs incurred to conduct research and development, such as the development of the BNA Platform and further enhancing the Evoke product portfolio. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
| ● | salaries and benefits; |
| ● | consulting arrangements; and |
| ● | other expenses incurred to advance our research and development activities. |
We expect research and development expenses to continue to increase in the future as we further refine and optimize our products and invest in their evolution. It is likely that we will continue to evaluate opportunities and strategic partnerships to acquire or license other products and technologies, which may result in higher research and development expenses due to licensing fees and/or integrations.
Selling and Marketing Expenses
Selling and marketing expenses consist of employee-related expenses, including salaries, benefits, travel, clinical fees and other marketing functions, as well as fees paid for consulting services.
General and Administrative Expenses
General and administrative expenses consist of employee-related expenses, including salaries, benefits, travel and noncash stock-based compensation, and other administrative functions, as well as fees paid for legal, and accounting services, consulting fees and facilities costs not otherwise included in research and development expense. Legal costs include general corporate legal fees and patent costs. We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, additional insurance, investor relations and other administrative expenses and professional services.
Other (Income) Expense
Other (income) expenses consist primarily of interest bank fees and loan fees, foreign exchange gain or loss and penalties.
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Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and the disclosure of our contingent liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
See Note 3 to our financial statements elsewhere in this Quarterly Report, as well as our previously filed 2024 Annual Report for information about our significant accounting policies and how estimates are involved in the preparation of our financial statements.
Results of Operations
Comparison of the Three Months Ended September 30, 2025 and 2024
The following table sets forth amounts from our condensed consolidated statements of operations for the three months ended September 30, 2025, and 2024:
| Three Months Ended | ||||||||||||
| September 30, | ||||||||||||
| $US, in thousands | ||||||||||||
| 2025 | 2024 | Change ($) | ||||||||||
| REVENUE | $ | 388 | $ | 33 | $ | 355 | ||||||
| COST OF GOODS SOLD | 242 | - | 242 | |||||||||
| GROSS PROFIT | 146 | 33 | 113 | |||||||||
| OPERATING EXPENSES: | ||||||||||||
| Research and development expenses | 378 | 878 | (500 | ) | ||||||||
| Selling and marketing expenses | 265 | 431 | (166 | ) | ||||||||
| General and administration expenses | 2,007 | 2,992 | (985 | ) | ||||||||
| Impairment of intangible assets | 152 | - | 152 | |||||||||
| TOTAL OPERATING EXPENSES | 2,802 | 4,301 | (1,499 | ) | ||||||||
| OPERATING LOSS | (2,656 | ) | (4,268 | ) | (1,612 | ) | ||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Interest and bank fees | (10 | ) | (24 | ) | 14 | |||||||
| Interest income | 29 | - | 29 | |||||||||
| Foreign exchange gain (loss) | - | (2 | ) | 2 | ||||||||
| Other income (expenses) | (2 | ) | 5 | (7 | ) | |||||||
| TOTAL OTHER INCOME (EXPENSES) | 17 | (21 | ) | 38 | ||||||||
| LOSS BEFORE INCOME TAX | (2,639 | ) | (4,289 | ) | 1,650 | |||||||
| Provision for income tax | - | - | - | |||||||||
| NET LOSS | $ | (2,639 | ) | $ | (4,289 | ) | $ | 1,650 | ||||
Revenue
Revenue for the three months ended September 30, 2025, was $388, as compared to $33, in the three months ended September 30, 2024, representing an increase of $355, or 1,076%. The increase is primarily due to revenue from the acquisition of Evoke Neuroscience.
Cost of Goods Sold
Cost of goods sold for the three months ended September 30, 2025, was $242, up from $nil in the same period of 2024, reflecting Evoke product sales and related operating costs. This included an $85 inventory adjustment; excluding this, gross profit margin would have been 60%.
Operating Expenses
Research and Development Expenses
Research and development expenses for the three months ended September 30, 2025, were $378, as compared to $878, for the three months ended September 30, 2024, representing a decrease of $500, or 57%. The decrease was primarily due to equity vesting in conjunction with the merger in August 2024.
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Selling and Marketing Expenses
Selling and marketing expenses for the three months ended September 30, 2025, were $265, as compared to $431, for the three months ended September 30, 2024, representing a decrease of $166, or 39%. The decrease was primarily due to a reduction in the use of consultants that were used in a rebranding in 2024.
General and Administration Expenses
General and administration expenses for the three months ended September 30, 2025, were $2,007 as compared to $2,992, for the three months ended September 30, 2024, representing a decrease of $985, or 33%. The decrease was primarily due to the reduction in legal fees incurred during 2024 in conjunction with the merger in August 2024.
Impairment of Intangible Assets
Impairment expenses for the three months ended September 30, 2025, were $152, as compared to $nil for the three months ended September 30, 2024, representing an increase of $152. The increase is due to one of the capitalized upgrades no longer being expected to be utilized as a result of a change in management and subsequent direction. Consequently, the upgrade was deemed fully impaired, resulting in the recording of an impairment charge of $152.
Other Income (Expense)
Other Income (Expense) for the three months ended September 30, 2025, was $17, as compared to $(21), for the three months ended September 30, 2024, representing an increase in income of $38 or 543%. The primary reason for the increase is a result of interest income for held funds during the quarter.
Comparison of the Nine Months Ended September 30, 2025 and 2024
The following table sets forth amounts from our condensed consolidated statements of operations for the nine months ended September 30, 2025, and 2024:
| Nine Months Ended | ||||||||||||
| September 30, | ||||||||||||
| $US, in thousands | ||||||||||||
| 2025 | 2024 | Change ($) | ||||||||||
| REVENUE | $ | 730 | $ | 55 | $ | 675 | ||||||
| COST OF GOODS SOLD | 267 | - | 267 | |||||||||
| GROSS PROFIT | 463 | 55 | 408 | |||||||||
| OPERATING EXPENSES: | ||||||||||||
| Research and development expenses | 1,026 | 1,517 | (491 | ) | ||||||||
| Selling and marketing expenses | 672 | 973 | (301 | ) | ||||||||
| General and administration expenses | 4,968 | 4,183 | 785 | |||||||||
| Impairment of intangible assets | 152 | - | 152 | |||||||||
| TOTAL OPERATING EXPENSES | 6,818 | 6,673 | 145 | |||||||||
| OPERATING LOSS | (6,355 | ) | (6,618 | ) | 263 | |||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Interest and bank fees | (153 | ) | (36 | ) | (117 | ) | ||||||
| Interest income | 59 | - | 59 | |||||||||
| Foreign exchange gain (loss) | (4 | ) | 1 | (5 | ) | |||||||
| Change in derivative fair value | (9,369 | ) | - | (9,369 | ) | |||||||
| Loss on settlement of convertible promissory note | (1,353 | ) | - | (1,353 | ) | |||||||
| Other income (expense) | (223 | ) | (22 | ) | (201 | ) | ||||||
| TOTAL OTHER INCOME (EXPENSE) | (11,043 | ) | (57 | ) | (10,986 | ) | ||||||
| NET LOSS AND COMPREHENSIVE LOSS | (17,398 | ) | (6,675 | ) | (10,723 | ) | ||||||
| Provision for income tax | 4 | - | 4 | |||||||||
| NET LOSS | $ | (17,402 | ) | $ | (6,675 | ) | $ | (10,727 | ) | |||
Revenue
Revenue for the nine months ended September 30, 2025, was $730, as compared to $55, in the nine months ended September 30, 2024, representing an increase of $675, or 1,227%. The increase is primarily due to revenue from the acquisition of Evoke Neuroscience.
Cost of Goods Sold
Cost of goods sold for the nine months ended September 30, 2025, was $267, up from $nil in the same period of 2024, reflecting Evoke product sales and related operating costs. This included an $85 inventory adjustment; excluding this, gross profit margin would have been 75%.
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Operating Expenses
Research and Development Expenses
Research and development expenses for the nine months ended September 30, 2025, were $1,026, as compared to $1,517, for the nine months ended September 30, 2024, representing a decrease of $491, or 32%. The decrease is primarily due to equity vesting in conjunction with the merger in August 2024.
Selling and Marketing Expenses
Selling and marketing expenses for the nine months ended September 30, 2025, were $672, as compared to $973, for the nine months ended September 30, 2024, representing a decrease of $301, or 31%. The decrease was primarily due to a reduction in consultant use driven by a rebranding in 2024.
General and Administration Expenses
General and administration expenses for the nine months ended September 30, 2025, were $4,968, as compared to $4,183, for the nine months ended September 30, 2024, representing an increase of $785, or 19%. The increase primarily reflects additional costs related to directors and officers (D&O) insurance following the August 2024 Merger, which accounted for approximately 48% of the increase. The remaining 51% of the increase was attributable to accrued fees associated with the cancellation of the Equity Line of Credit.
Impairment of Intangible Assets
Impairment expenses for the three months ended September 30, 2025, were $152, as compared to $nil for the three months ended September 30, 2024, representing an increase of $152. The increase is due to one of the capitalized upgrades no longer being expected to be utilized as a result of a change in management and subsequent direction. Consequently, the upgrade was deemed fully impaired, resulting in the recording of an impairment charge of $152.
Other Income (Expense)
Other income (expense) for the nine months ended September 30, 2025, were $11,043, as compared to $57, for the nine months ended September 30, 2024, representing an increase of $10,986, mainly due to the change in derivative fair value and loss on settlement of promissory note.
Liquidity and Capital Resources
The following discussion provides an analysis of our liquidity and capital resources and should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included in this Quarterly Report on Form 10-Q. Management evaluates liquidity and capital resources by reviewing cash flows from operating, investing, and financing activities and assessing whether existing cash balances and anticipated cash flows are sufficient to meet current and anticipated operating requirements, working-capital needs, and planned capital expenditures.
For the next 12 months, we expect to continue to incur negative cash flows from operations as we integrate the Evoke and BNA products and continue to invest in the expansion of our sales organization. On April 30, 2025, we acquired all outstanding stock of Evoke for approximately $6,000, consisting of $3,000 in cash and 857,142 shares of our common stock.
Beyond the next 12 months, our ability to achieve profitability will depend on the successful commercialization of our combined Evoke and BNA product portfolio. We expect to incur significant costs associated with continued product development, commercialization, and distribution activities. As a result, we will require substantial additional capital to fund ongoing operations and to implement our business strategy prior to achieving positive cash flows from operating activities.
Until we generate sufficient revenues from product sales to cover operating expenses, working-capital requirements, and capital expenditures, we expect to finance our operations through the issuance of equity, debt financing, or other sources of capital. There can be no assurance that such financing will be available to us on commercially reasonable terms, or at all. If we are unable to obtain additional financing as needed, we may be required to delay, reduce, or discontinue portions of our business plan, which could adversely affect our ability to continue operations.
There is substantial doubt about our ability to continue as a going concern, as evidenced by our accumulated deficit of $108,896 and negative cash flows from operating activities of $6,389 as of September 30, 2025. The report of our independent registered public accounting firm for the year ended December 31, 2024, also expressed substantial doubt about our ability to continue as a going concern.
Management’s plan to address the conditions giving rise to substantial doubt includes: (i) disciplined operating expense management and integration synergies from the Evoke acquisition; and (ii) targeted commercial expansion to drive recurring revenue. These plans involve assumptions about capital markets and customer demand that may occur as expected.
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Our expectations regarding the sufficiency of our capital resources in the near term and our ability to obtain additional capital in the long term are based on estimates and assumptions that may prove to be inaccurate. As a result, we could exhaust our available capital resources sooner than anticipated and may not be able to obtain additional funding on favorable terms, or at all.
We have no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that would be material to investors.
Cash flows
The following table sets forth the significant sources and uses of cash for the periods noted below:
| Nine Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2025 | 2024 | Change | ||||||||||
| (in thousands) | ||||||||||||
| Net cash (used in) provided by | ||||||||||||
| Operating activities | $ | (6,389 | ) | $ | (4,937 | ) | $ | (1,452 | ) | |||
| Investing activities | $ | (2,465 | ) | $ | (401 | ) | $ | (2,064 | ) | |||
| Financing activities | $ | 11,369 | $ | 4,425 | $ | 6,944 | ||||||
Operating Activities
For the nine months ended September 30, 2025, net cash used in operating activities was $6,389 as compared to $4,937, for the nine months ended September 30, 2024, representing an increase of $1,452, or 29%. This increase in net cash used in operating activities is primarily due to an increase in operating costs, a reduction in liabilities, and costs related to the Evoke acquisition.
Investing Activities
For the nine months ended September 30, 2025, net cash used in investing activities was $2,465, as compared to $401, cash used in investing activities for the nine months ended September 30, 2024, representing an increase of $2,064, or 515%. The increase in cash used in investing activities is primarily attributed to the acquisition of Evoke Neuroscience.
Financing Activities
For the nine months ended September 30, 2025, net cash provided from financing activities was $11,369, as compared to $4,425, for the nine months ended September 30, 2024, representing an increase of $6,944, or 157%. The increase was primarily due to warrant exercises and unit offerings in both March and June.
Recent Financings
June 2025 Units Offering
On June 16, 2025, we entered into the June 2025 Purchase Agreement with the Investors, pursuant to which we issued and sold 400,000 Units, at a purchase price of $3.00 per Unit. Each Unit consists of (i) either (A) one share of common stock, or (B) a prefunded warrant to purchase one share of common stock at a nominal exercise price of $0.0001 per share, to the extent that acquiring the shares of common stock instead of the Pre-Funded Warrant would have caused the investors to own in excess of 4.99% of the outstanding common stock on a post-issuance basis; (ii) one common stock purchase warrant to purchase one share of common stock over five (5) years at an exercise price of $3.50 per share; and (iii) one common stock purchase warrant to purchase one share of common stock over five (5) years at an exercise price of $4.00 per share. The Prefunded Warrant, the $3.50 Warrant and the $4.00 Warrant include a beneficial ownership limitation, which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise any portion of the warrants, to the extent that, after giving effect to such exercise, the holder (together with the holder’s affiliates) would beneficially own more than 4.99% of the outstanding shares of common stock immediately after the issuance of the common stock issuable upon exercise. On the same date, the closing under the June 2025 Purchase Agreement occurred, and the Company issued 400,000 Units to investors at a total purchase price of $1,200.
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March 2025 Units Offering
On March 28, 2025, we entered into the Subscription Agreement with the Subscribers, pursuant to which we issued and sold 547,737 of March 2025 Units, at a purchase price of $3.00 per March 2025 Unit. Each March 2025 Unit consists of (i) either (A) one share of common stock or (B) a prefunded warrant to purchase common stock to the extent that acquiring the shares of common stock instead of such prefunded warrants would have caused the Subscriber to own in excess of 4.99% of the shares of outstanding common stock on a post-issuance basis and (ii) one common stock purchase warrant to purchase common stock over thirty-six (36) months at an exercise price of $4.00 per share. On the same date, the closing under the Subscription Agreement occurred, and we issued the March 2025 Units to the Subscribers.
The prefunded warrants have a nominal exercise price of $0.0001 (subject to standard adjustments for stock splits, stock dividends, recapitalizations, mergers and similar transactions) and may be exercised on a cashless basis. The prefunded warrants also contain a beneficial ownership limitation which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise, any portion of a prefunded to the extent that, after giving effect to the exercise, such holder (together with such holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the exercise. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.
In connection with the March 2025 Units Offering, we entered into a finder’s fee agreement with Canaccord, pursuant to which the Company will pay Canaccord at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Canaccord, payable in cash; and (ii) the issuance of the Finder’s Warrant to Canaccord of up to 7.5% of the Units subscribed for by person introduced to the Company by Canaccord. Each Finder’s Warrant will be exercisable to purchase one additional common stock at $4.00 per share for a period of 36 months from the closing of the March 2025 Units Offering.
In connection with the March 2025 Units Offering, we entered into a finder’s fee agreement with Research Capital, pursuant to which the Company will pay Research Capital at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Research Capital, payable in cash; and (ii) the issuance of the Finder’s Warrant of the Company to Research Capital of up to 7.5% of the March 2025 Units subscribed for by person introduced to the Company by Research Capital. Each Finder’s Warrant will be exercisable to purchase one additional common stock at $3.00 per share for a period of 3 years from the date of issuance of such Finder’s Warrant.
Warrants Exercises
Over the week of February 21, 2025, we received total proceeds of $8,825 from the exercise of warrants to purchase 823,530 shares of the common stock, at an exercise price of $6.83, and warrants to purchase 800,000 shares of commons stock, at an exercise price of $4.00, respectively. The warrants were issued pursuant to private placements that closed on August 12, 2024, and December 20, 2024, and no new warrants were issued by the Company as a result of the exercises.
Known Trends, Events, and Uncertainties
We are increasingly reliant on machine learning models for EEG/ERP interpretation. Model performance depends on training data diversity and ongoing monitoring to ensure generalizability. Evolving regulatory guidance (including the FDA’s approach to AI/ML-enabled medical devices) and payer expectations could impact timelines and costs. Additionally, our handling of PHI and clinical data requires robust cybersecurity, vendor oversight, and compliance with HIPAA and CFR Part 11. A significant data reach, integrity failure, or model drift could adversely affect adoption, revenues, and our reputation.
As with other companies that are in our industry, we will need to successfully manage normal business and scientific risks. Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In addition, the emergence and effects of public health crises, such as endemics and epidemics are difficult to predict, changes in Economic and trade policies could have a material and significant impact and the consequences of the ongoing war between Israel and Hamas, including related sanctions and countermeasures and the effects of such war on our employees in Israel, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations. Furthermore, other than as discussed in this Form 10-Q, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.
Other than as discussed above and elsewhere in this Form 10-Q, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.
As required by Rule 13a-15(b) of the Exchange Act, an evaluation as of September 30, 2025, was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of September 30, 2025 were not effective for the reasons stated below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets: (ii) provide reasonable assurance (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting policies (b) our receipts and expenditures are being made only in accordance with authorizations of our management and directors: and (c) regarding the prevention or timely detection of the unauthorized acquisition use or disposition of assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
As of September 30, 2025, our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this evaluation, our management concluded that, as of September 30, 2025, our internal control over financial reporting was not effective for the reasons stated in the following paragraph.
During our evaluations of internal controls, we concluded that material weaknesses exist in our internal controls over financial reporting as outlined below. These material weaknesses did not result in any identified misstatements, and there were no changes to previously reported financial results.
| (i) | The Company does not have adequate Information Technology General Controls (“ITGCs”) or related Information Produced by Entity (IPE) Controls resulting in transactional risk and subsequent downstream reporting risks; |
| (ii) | The Company does not have a segregation of duties to ensure information is consistently reviewed and approved by someone other than the preparer; |
This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only managements report in this Quarterly Report.
Remediation Plan for the Material Weaknesses
Management is committed to the remediation of the material weakness described above which began in Q1 2025 and into the remainder of 2025. Management has implemented and will continue to implement measures designed to ensure that the control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively during the remainder of the year with projected remediation date of Q1 2026.
Remediation efforts include but are not limited to (a) developing, documenting and enhancing processes surrounding ITGCs, and (b) hiring / contracting additional resources to support the financial reporting process.
Management will test and evaluate the implementation of internal controls and revised processes to ascertain whether they are designed and operating effectively to provide reasonable assurance that they will prevent or detect a material error in our financial statements.
27
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not currently aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition, or operating results.
Item 1A. RISK FACTORS
There are no material changes from the risk factors previously disclosed in the Company’s Registration Statement on Form S-1, as filed with the SEC on July 18, 2025.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
There were no unregistered sales of the Company’s equity securities during the three months ended September 30, 2025, other than those previously reported in a Current Report on Form 8-K and in a registration statement on Form S-1.
Purchases of Equity Securities
No repurchases of our common stock were made during the three months ended September 30, 2025.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
No information was required to be disclosed in a Current Report on Form 8-K during the three months ended September 30, 2025, but was not reported.
None of our directors or “officers,”
as defined in Rule 16a-1(f) under the Exchange Act,
28
Item 6. EXHIBITS
| * | Filed herewith |
| ** | Furnished herewith. |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FIREFLY NEUROSCIENCE, INC. | ||
| Date: November 12, 2025 | By: | /s/ Greg Lipschitz |
| Greg Lipschitz | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Paul Krzywicki | |
| Paul Krzywicki | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
30
Exhibit 31.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Greg Lipschitz, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Firefly Neuroscience, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures; and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 12, 2025 | /s/ Greg Lipschitz |
| Greg Lipschitz | |
|
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Paul Krzywicki, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Firefly Neuroscience, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures; and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 12, 2025 | /s/ Paul Krzywicki |
| Paul Krzywicki | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Firefly Neuroscience, Inc. (“Company”) for the period ended September 30, 2025 (the “Report”), I, Greg Lipschitz, Chief Executive Officer (Principal Executive Officer) of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
IN WITNESS WHEREOF, the undersigned has executed this statement on November 12, 2025.
| Date: November 12, 2025 | /s/ Greg Lipschitz |
| Greg Lipschitz | |
|
Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Firefly Neuroscience, Inc. (“Company”) for the period ended September 30, 2025 (the “Report”), I, Paul Krzywicki, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
IN WITNESS WHEREOF, the undersigned has executed this statement on November 12, 2025.
| Date: November 12, 2025 | /s/ Paul Krzywicki |
| Paul Krzywicki | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |