NOTE 15: EQUITY

On February 13, 2025, convertible promissory note (Note 11) was converted to 800,000 shares of common stock at the conversion price of $3.00 per share. Transaction costs incurred of $39 relating to the exercise of the conversion option are offset within additional paid-in capital.

On March 28, 2025, the Company entered into a private placement transaction (the “March 2025 Units Offering”), pursuant to which the Company agreed to issue and sell (i) 547,737 shares of common stock and (ii) warrants (the “PIPE 2025 warrants”) to purchase up to 547,737 shares of common stock, at a combined purchase price of $3.00 per unit. Each warrant entitles the purchasers to acquire one share of common stock at a price of $4.00 per share for a period of three years from the date of issue. The Company issued broker warrants to purchase up to 25,958 shares of common stock to the associated broker in connection with the offering. The aggregate gross proceeds from the March 2025 Units Offering were $1,643. The Company incurred $179 of costs associated with the issuance. The PIPE 2025 warrants and related broker warrants are equity classified instruments and are recorded as equity.

On April 28, 2025, the Company issued 340,000 shares of common stock pursuant to the Inducement Agreement (Note 15.b).

On April 30, 2025, the Company issued 857,142 shares of common stock for the acquisition of Evoke (Note 4). The shares were measured at fair value at $3.20 per share.

On June 16, 2025, the Company entered into a securities purchase agreement with certain accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell 400,000 units (each, a “Unit” and collectively, the “Units”) at a purchase price of $3.00 per Unit, for aggregate gross proceeds of $1,200. Each Unit consists of (i) either (A) one share of common stock or (B) a prefunded warrant to purchase one share of common stock (the “Pre-Funded Warrant”) at a nominal exercise price of $0.0001 per share, (ii) one common stock purchase warrant (the “$3.50 Warrant”) to purchase one share of common stock at an exercise price of $3.50 per share, exercisable for five years, and (iii) one common stock purchase warrant (the “$4.00 Warrant,” and together with the Pre-Funded Warrants and $3.50 Warrants, the “Warrants”) to purchase one share of common stock at an exercise price of $4.00 per share, also exercisable for five years. The Company issued 400,000 Units to the Investors, consisting of 340,000 shares of common stock, 60,000 Pre-Funded Warrants, 400,000 $3.50 Warrants, and 400,000 $4.00 Warrants. The Company incurred no costs associated with the issuance.

During the year ended  December 31, 2024, the Company issued 86,953 Series C Units and received aggregate gross proceeds of $1,070. The Company incurred $125 of costs associated with the issuance and issued broker warrants to purchase up to 4,163 shares of common stock to the associated broker in connection with the Series C Offering. The shares of Series C Preferred Stock issued are equity classified instruments and are recorded as equity. Each Series C Warrant entitles the purchasers to acquire one share of common stock at an exercise price of $24.62 per share for a period of three years from the date of issuance (Note 15.a). The conversion price of the Series C Preferred Stock was amended contemporaneously with the consummation of the Merger. As of August 12, 2024, the mandatory conversion feature of the Series C Preferred Stock was triggered upon the consummation of the Merger. Pursuant to the terms of Series C Preferred Stock, all issued and outstanding shares of the Series C Preferred Stock converted into 596,145 shares of common stock upon consummation of the Merger.

On July 26, 2024, the Company entered into a private placement transaction (the “PIPE”), pursuant to which the Company agreed to issue and sell (i) 319,207 shares of common stock and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 504,324 shares of common stock, and (iii) warrants (the “PIPE Warrants”) to purchase up to 823,530 shares of common stock (as adjusted for the Exchange Ratio). The purchase price of each share of common stock and accompanying PIPE Warrant was $4.25 and the purchase price of each Pre-Funded Warrant and accompanying PIPE Warrant was $4.249. The PIPE closed on August 12, 2024, contemporaneously with the consummation of the Merger. The aggregate gross proceeds from the PIPE were approximately $3,500. The Company incurred $137 of costs associated with the issuance.

On July 27, 2024, the Company entered into four standalone strategic investment agreements. One of the service providers is owned by a director of the Company (Note 15.a). Pursuant to the strategic investment agreements, the Company agreed to issue 433,360 of shares of common stock. The shares are fully vested upon issuance and have been valued at $2,440. These shares were subject to regulatory lock-up restrictions. Of these shares, 140,749 are subject to a 12-month lock-up restriction and 292,611 shares are subject to a 6-month lock-up restriction. The restriction is a characteristic of the security and, therefore, is considered in the fair value measurements. The shares were measured at fair value, considering the effect of the post-vesting restrictions via accounting for discount for lack of marketability (“DLOM”), determined using the Finnerty model. The shares were issued on August 12, 2024, contemporaneously with the consummation of the Merger. Pursuant to the terms of the strategic investment agreements, the service providers granted the Company $2,925 of service credits to perform business consulting and software development services that are to be consumed in future. Service credits were recognized as prepaid expenses in accordance with ASC 718 (Note 6).

On August 12, 2024, the Company issued 45,344 shares of common stock with the intention to settle accrued liabilities. As the Company did not reach a contractual agreement to settle the outstanding amount, the Company recognized a note receivable as contra-equity in return for shares of common stock issued.

On August 12, 2024, pursuant to the terms of the restricted share units (the “RSUs”), all issued and outstanding RSUs of the Company vested and the Company issued 59,264 shares of common stock and recognized $410 of share-based compensation expense (Note 15.f).

In August 2024, the Company issued 802,142 shares of common stock to WaveDancer’s pre-Merger shareholders (Note 5).

During the year ended  December 31, 2024, certain warrant holders exercised their warrants to purchase 638,919 shares of common stock for proceeds of $36 for the Company.

The following table summarizes the Company’s warrant activity:

During the year ended December 31, 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 823,530 shares of common stock at an exercise price of $6.83. On February 12, 2025, PIPE 2024 warrants were exercised in full for cash proceeds of $5,625. The Company recorded a deemed dividend of $4,410 in relation to the Inducement Agreement as it is considered an inducement offer to exercise the PIPE 2024 warrants. The fair value of a deemed dividend is estimated based on the fair value of the underlying share of common stock on the warrant exercise date. On April 28, 2025, the Company issued 340,000 shares of its common stock pursuant to the Inducement Agreement.

On December 16, 2025, the Company entered into a warrants cancellation and exchange agreement (the “Warrant Exchange Agreement”) with holders of the Company's $3.50 and $4.00 Warrants. Pursuant to the Warrant Exchange Agreement, the holders agreed to exchange the $3.50 and $4.00 warrants for cash at an exercise price of $0.50. The Company recorded a deemed dividend of $239 in relation to the Warrant Exchange Agreement as it is considered an inducement offer to exercise the $3.50 Warrants and $4.00 Warrants. 

Further, the Company received proceeds of $3,200 from the exercise of Convertible Promissory Note Warrants (Note 11).

Warrants exercisable for little or no consideration are fully vested warrants that allows the holders to acquire a specified number of the issuer’s shares at a nominal exercise price. The following table summarizes the Company’s penny warrant activity for the year ended  December 31, 2025:

On June 7, 2024, the Company issued Series D warrants to purchase up to an aggregate 92,799 shares of common stock to certain investors at a nominal exercise price for a period of five years from the issuance date. The exercisability of the Series D warrants was contingent upon meeting certain market capitalization or the occurrence of a liquidity event. Upon the consummation of the Merger on August 12, 2024, the Series D warrants became fully vested. The Series D warrants were determined to be an equity instrument. The Company determined the fair value of the Series D warrants of $610 based on a stock price established on the grant date.

In 2010, the Company’s board of directors approved an employee and service provider’s stock option plan. On July 8, 2023, the board of directors approved new equity incentive plan (the “Plan”). The Plan permits the grant of options, share appreciation rights (“SARs”), restricted share units (“RSUs”), deferred share units (“DSUs”) and performance share units (“PSUs”). In respect of options, the aggregate number of shares of common stock issuable under the Plan shall not exceed twelve percent of the issued and outstanding shares of common stock at any point in time. In respect of SARs, RSUs, DSUs and PSUs: (i) the maximum aggregate number of shares of common stock issuable under this Plan in respect of SARs, RSUs, DSUs and PSUs shall not exceed ten percent of the issued and outstanding shares of common stock as of July 8, 2023; (ii) the total number of SARs, RSUs, DSUs and PSUs issuable to any participant under this Plan shall not exceed one percent of the issued and outstanding shares of common stock at the time of the award.

No SARs or PSUs were issued as of December 31, 2025.

The following table presents share-based compensation expense by instrument type:

A summary of option activity under the Plan as of  December 31, 2025, and changes during the year then ended is presented below.

The share-based compensation expense related to options for  December 31, 2025 and 2024 was $96 and 1,574, respectively. The fair value of options granted for the year ended  December 31, 2025 and 2024 was $34 and $1,600, respectively. The intrinsic value of the options outstanding as of  December 31, 2025 and 2024 was $nil.

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

A summary of the Company’s non-vested options as of  December 31, 2025, and changes during the year ended  December 31, 2025, is presented below.

As of  December 31, 2025, there was $41 of total unrecognized compensation cost related to nonvested options granted under the Plan.

On April 2, 2024, the Company issued stock options to its officers to purchase up to an aggregate of 19,344 shares of common stock at an exercise price of $5.18 with a term of five years, where the exercise price is equal to a 25% discount to the issue price of Private Firefly’s equity securities in an initial public offering (an “IPO Transaction”), that results in the Company’s shares of common stock being listed on the Nasdaq Stock Market or another recognized securities exchange or traded on the over-the-counter market. Options to purchase up to 11,024 shares of common stock shall vest in 36 equal installments at the end of each calendar month over a period of three years beginning March 1, 2024. Options to purchase up to 8,320 shares of common stock shall vest in 36 equal installments at the end of each calendar month over a period of Three years beginning on the date of the Merger. The vesting of management options was contingent upon the occurrence of a liquidity event. Upon the consummation of the Merger on August 12, 2024, the options were considered granted in accordance with ASC 718. The exercise price was determined to be $5.18 per share. The Company determined the fair value of the options of $99 using the Black-Scholes pricing model. The Company used graded-vesting method for the recognition of share-based compensation related to these management options.

Upon the consummation of the Merger on August 12, 2024, RSUs vested and the Company issued 59,264 shares of common stock and recognized $410 of share-based compensation expense.

A summary of RSU activity under the Company’s equity incentive plan as of  December 31, 2025, and changes during the period ended is presented below.

The share-based compensation expense related to RSUs for the year ended  December 31, 2025 and 2024 was $346 and $410, respectively. The fair value of RSUs granted for the year ended  December 31, 2025 and 2024, was $1,478 and $nil, respectively.

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  December 31, 2025, and changes during the twelve-month period ended, is presented below.

As of  December 31, 2025, there was $1,140 of total unrecognized compensation cost related to nonvested RSUs granted. That cost is expected to be recognized over a weighted average period of 2.38 years.

A summary of DSU activity under the Company’s equity incentive plan as of  December 31, 2025, and changes during the period ended, is presented below.
 

The share-based compensation expense related to DSUs for the year ended  December 31, 2025 and 2024 was $267 and $nil, respectively. The fair value of DSUs granted for the year ended  December 31, 2025, and 2024, was $539 and $nil, respectively.

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

A summary of the Company’s nonvested DSUs as of  December 31, 2025, and changes during the twelve-month period ended, is presented below.
 

As of  December 31, 2025, there was $273 of total unrecognized compensation cost related to nonvested DSUs granted. That cost is expected to be recognized over a weighted average period of 0.83 years.