What changed in this filing

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Item 9A. Controls and Procedures

2022-03-31 compared with 2021-04-13 · 674 added, 677 removed, 436 unchanged (76% of the section changed)

1 unchanged sentence

of Disclosure Controls and Procedures

management, with the participation of our General Manager and our Chief Financial Officer, evaluated the effectiveness

of our disclosure controls and procedures as of December 31, 2020.

The term “disclosure controls and procedures,”

as defined in Rules 13a-15(e) and 15d- 15(e) under the Exchange Act, means controls and other procedures of a company that are

designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange

Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be

disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s

management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate

to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how

well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies

its judgment in evaluating the cost- benefit relationship of possible controls and procedures.

Based on the evaluation of our

disclosure controls and procedures as of December 31, 2020, our President and Chief Financial Officer concluded that, as of such

date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s

management, with the participation of our Principal Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our

disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31,

2021, or the Evaluation Date.

Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure

controls and procedures are ineffective in recording, processing, summarizing and reporting, on a timely basis, information required

to be included in periodic filings under the Exchange Act and that such information is not accumulated and communicated to management,

including our principal executive and financial officers, in a manner sufficient to allow timely decisions regarding required disclosure,

due to the material weaknesses in internal control over financial reporting described below.

Report on Internal Control Over Financial Reporting

management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules

13a-15(f) and 15d-15(f) under the Exchange Act.

Our management assessed the effectiveness of our internal control over financial

reporting as of December 31, 2020.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring

Organizations of the Treadway Commission (“COSO”) in Internal Control —

the 2013 Integrated Framework.

has concluded that, as of December 31, 2020, its internal control over financial reporting was effective based on these criteria.

management, including our General Manager and Chief Financial Officer, does not expect that our disclosure controls and

procedures or our internal control over financial reporting will prevent all errors and all fraud.

A control system, no matter

how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of

controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation

of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been

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.

Under the supervision and with the participation of our management, including our Chief Executive

Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting

based principally on the framework and criteria established in Internal Control - Integrated Framework (2013) issued by the Committee

of Sponsoring Organizations of the Treadway Commission as of the end of the period covered by this report.

Based on that evaluation,

we have identified material weaknesses related to our internal control over financial reporting as of December 31, 2021 and concluded

that internal control over financial reporting as at December 31, 2021 were not effective.

As defined in Regulation 12b-2 under the Securities

Exchange Act, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting,

such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented,

or detected on a timely basis.

Specifically, as of December 31, 2021, the ineffectiveness of the Company’s internal control over

financial reporting was due to identification of material weaknesses related to lack of sufficient internal accounting personnel, segregation

of duties, and lack of sufficient internal controls (including IT general controls) that encompass the Company as a whole with respect

to entity and transactions level controls in order to ensure complete documentation of complex and non-routine transactions and adequate

financial reporting.

has identified corrective actions to remediate such material weaknesses, which includes hiring additional employees.

Management intends

to implement procedures to remediate such material weaknesses during the fiscal year 2022;

however, the implementation of these initiatives

may not fully address any material weaknesses that we may have in our internal control over financial reporting.

in Internal Control over Financial Reporting

were no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected,

or are reasonably likely to materially affect, our internal control over financial reporting.

As the Company has historically

had personnel both in the U.S.

the year ended December 31, 2021, there were no

changes in our internal control over financial reporting that have materially affected, or are reasonably

likely to materially affect, our internal control over financial reporting.

As the Company has historically had personnel both in the

and Israel, there has been no change in working status due to working remotely as a result of COVID-19.

Report of the Registered Public Accounting Firm

Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding

internal control over financial reporting.

Management’s report was not subject to attestation by the Company’s independent

registered public accounting firm pursuant to the rules of the SEC.

This Annual Report does not

include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of

the SEC that permit the Company to provide only management’s report in this Annual Report.

Other Information.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspection

Directors, Executive Officers, and Corporate Governance.

Except for the information about our Code

of Ethics below, the information required by this Item 10 is incorporated by reference from our definitive proxy statement for

our 2021 Annual Meeting of Stockholders (the “Proxy Statement”).

The definitive Proxy Statement will be filed with

the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this Annual Report on Form

We maintain a Code of Business Conduct

and Ethics (Code) that applies to all employees, including our principal executive officer, principal financial officer, principal

accounting officer, controller and persons performing similar functions, and including our independent directors, who are not

employees of the Company, with regard to their Integrity-related activities.

The Code incorporates guidelines designed to deter

wrongdoing and to promote honest and ethical conduct and compliance with applicable laws, rules and regulations.

for the information about our Code of Ethics below, the information required by this Item 10 is incorporated by reference from our definitive

proxy statement for our 2021 Annual Meeting of Stockholders (the “Proxy Statement”).

The definitive Proxy Statement will

be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this Annual Report

on Form 10-K.

maintain a Code of Business Conduct and Ethics (Code) that applies to all employees, including our principal executive officer, principal

financial officer, principal accounting officer, controller and persons performing similar functions, and including our independent directors,

who are not employees of the Company, with regard to their Integrity-related activities.

The Code incorporates guidelines designed to

deter wrongdoing and to promote honest and ethical conduct and compliance with applicable laws, rules and regulations.

The Code also

incorporates our expectations of our employees that enable us to provide accurate and timely disclosure in our filings with the

SEC and other public communications.

In addition, the Code incorporates guidelines pertaining to topics such as complying with

applicable laws, rules, and regulations;

incorporates our expectations of our employees that enable us to provide accurate and timely disclosure in our filings with the SEC and

other public communications.

In addition, the Code incorporates guidelines pertaining to topics such as complying with applicable laws,

rules, and regulations;

insider trading;

reporting Code violations;

and maintaining accountability for adherence

The full text of our Code is published on our web site at http://www.integrity-app.com/investor-relations/corporate-governance/

and is incorporated by reference herein.

We intend to disclose future amendments to certain provisions of our Code, or waivers

of such provisions granted to our principal executive officer, principal financial officer, principal accounting officer or controller

and persons performing similar functions on our web site.

Except as expressly stated herein, the information contained on our

website does not constitute a part of this Annual Report on Form 10-K and is not incorporated by reference herein.

and maintaining accountability for adherence to the Code.

text of our Code is published on our web site at http://www.integrity-app.com/investor-relations/corporate-governance/ and is incorporated

by reference herein.

We intend to disclose future amendments to certain provisions of our Code, or waivers of such provisions granted

to our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar

functions on our web site.

Except as expressly stated herein, the information contained on our website does not constitute a part of

this Annual Report on Form 10-K and is not incorporated by reference herein.

Executive Compensation.

The information required for this Item

is incorporated by reference from our Proxy Statement.

Security Ownership of Certain

Beneficial Owners and Management and Related Stockholder Matters.

The information required for this Item

is incorporated by reference from our Proxy Statement.

Certain Relationships and Related

Transactions, and Director Independence.

The information required for this Item

is incorporated by reference from our Proxy Statement.

Principal Accountant Fees and

The information required for this Item

is incorporated by reference from our Proxy Statement.

information required for this Item is incorporated by reference from our Proxy Statement.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

information required for this Item is incorporated by reference from our Proxy Statement.

Certain Relationships and Related Transactions, and Director Independence.

information required for this Item is incorporated by reference from our Proxy Statement.

Principal Accountant Fees and Services.

information required for this Item is incorporated by reference from our Proxy Statement.

Exhibits, Financial Statement Schedules.

9 unchanged sentences

Certificate of Designation of Preferences and Rights of Series C 5.5% Convertible Preferred Stock (8)

Amendments to The Company's Certificate of Incorporation**

Specimen Certificate Evidencing Shares of Common Stock (1)

40 unchanged sentences

from the Ministry of Industry, Trade and Employment of the State of Israel (6)

Letter of Undertaking, addressed to the Ministry of Industry, Trade and Employment of the State of Israel –

Office of the Chief Scientist from Integrity Applications Ltd.

Letter of Undertaking, addressed to the Ministry of Industry, Trade and Employment of the State of Israel – Office of the Chief Scientist from Integrity Applications Ltd.

Investment Agreement, dated March 16, 2004, by and among A.D.

16 unchanged sentences

Subsidiaries of Integrity Applications, Inc.

Consent of Marcum LLP

Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as Adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 **

5 unchanged sentences

Instance Document **

Schema Document **

XBRL Schema Document **

Calculation Linkbase Document **

2 unchanged sentences

XBRL Presentation Linkbase Document **

filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on August 22, 2011.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on September 5, 2014.

Cover Page Interactive Data File (embedded within the Inline XBRL document)

filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on August 22, 2011.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on September 5, 2014.

filed as an exhibit to Amendment No.

1 to the Company’s Registration Statement on Form S-1, as filed with the SEC on

October 7, 2011.

filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2017, as filed with

the SEC on August 18, 2017.

1 to the Company’s Registration Statement on Form S-1, as filed with the SEC on October

filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2017, as filed with the SEC

on August 18, 2017.

filed as an exhibit to Amendment No.

3 to the Company’s Registration Statement on Form S-1, as filed with the SEC on

November 10, 2011.

filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as filed

with the SEC on March 27, 2014.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 15, 2016.

filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed

with the SEC on March 31, 2017.

filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on November 7, 2017.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 15, 2017

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 7, 2018.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 23, 2016.

3 to the Company’s Registration Statement on Form S-1, as filed with the SEC on November

filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as filed with

the SEC on March 27, 2014.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 15, 2016.

filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with

the SEC on March 31, 2017.

filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on November 7, 2017.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 15, 2017

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 7, 2018.

filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 23, 2016.

Plan or Arrangement or Management Contract.

to the requirements of Section 13 or 15(d) 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 as of April 13, 2021.

APPLICATIONS, INC.

Financial Officer (Principal Executive and Financial Officer)

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the registrant and in the capacities and on the dates indicated.

on its behalf by the undersigned, thereunto duly authorized as of March 31, 2022.

GLUCOTRACK, INC.

INTEGRITY APPLICATIONS, INC.)

Operating Officer (Principal Executive Officer)

Financial Officer (Principal Financial Officer)

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

Financial Officer

1 unchanged sentence

Robert Fischell

April 13, 2021

Robert Fischell

April 13, 2021

Andrew Sycoff

April 13, 2021

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

Financial Statements

of December 31, 2021

Report of Independent Registered Public Accounting Firm

of Independent Registered Public Accounting Firm – ID No.

Financial Statements

1 unchanged sentence

Statements of Operations and Comprehensive Loss

Statements of Changes in Stockholders’

Equity (Deficit)

Statements of Changes in Stockholders’ Equity (Deficit)

Statements of Cash Flows

8 unchanged sentences

of Directors and the Stockholders of

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

on the financial statements

have audited the accompanying consolidated balance sheets of Integrity Applications, Inc.

(the “Company”) as of December

31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’

(deficit) and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material

respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash

flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted

in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

have audited the accompanying consolidated balance sheets of GlucoTrack Inc.

Integrity Applications, Inc.) (the “Company”)

as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’

equity (deficit) and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each

of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Emphasis of a matter

As discussed in Note 1B to the financial statements,

the Company has suffered recurring losses from operations and negative cash flow from operating activities.

Management’s evaluation

of the events and conditions and management’s plans to mitigate these matters are also described in Note 1B.

accounting matters

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

FAHN KANNE & CO.

1 unchanged sentence

Public Accountants (Isr.)

have served as the Company’s auditor since 2010.

APPLICATIONS, INC.

have served as the Company’s auditor since 2010.

INTEGRITY APPLICATIONS, INC.)

BALANCE SHEETS

In thousand of US dollars

(except share data)

December 31, 2021

8 unchanged sentences

Property and equipment, net (Note 5)

Non-current Restricted Cash

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Restricted cash

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

4 unchanged sentences

Non-current Liabilities

Long-Term Loans from Stockholders (Note 8)

Loans from stockholders (Note 7)

Operating lease liabilities, non-current (Note 4)

1 unchanged sentence

Total liabilities

Stockholders’

Equity (Deficit)

Common Stock of $ 0.001 par value (“Common Stock”):

Commitments and contingent liabilities (Note 8)

Stockholders’ Equity

Common Stock of $ 0.001 par value (“Common Stock”):

500,000,000 shares authorized;

200,781,064 and 161,858,436 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively

15,452,285 and 15,444,697 shares issued and outstanding as of December 31, 2021 and 2020, respectively

Common Stock Value

Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Accumulated deficit

Total Stockholders’

equity (deficit)

TOTAL LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

accompanying notes are an integral part of these condensed consolidated financial statements

APPLICATIONS, INC.

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

accompanying notes are an integral part of these consolidated financial statements

INTEGRITY APPLICATIONS, INC.)

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

In thousand of US dollars

In thousand of US dollars ( except

stock and per stock amounts)

Research and development expenses (Note 10)

Selling and Marketing (Note 12)

Marketing expenses (Note 11)

General and administrative expenses (Note 12)

1 unchanged sentence

Operating loss

Financing income (expense), net

Loss for the period

Other comprehensive income:

Other expense (Income)

Financing income, net

Loss for the year

Other comprehensive loss:

Foreign currency translation adjustment

Comprehensive Loss for the period

Loss per share (Basic) (Note 15)

Loss per share (Diluted) (Note 15)

Common shares used in computing Basic and Diluted Loss per share (Note 15)

Comprehensive loss for the year

Loss per share (Basic and Diluted)

Weighted average number of common stock outstanding used in computing basic

and diluted net loss per share

accompanying notes are an integral part of the consolidated financial statements.

APPLICATIONS, INC.

OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

thousand of US dollars (except share data)

Stockholders’

INTEGRITY APPLICATIONS, INC.)

OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

comprehensive

In thousand of US dollars (except

Accumulated other

Stockholders’

comprehensive income (loss)

Balance as of January 1, 2020

Loss for the period

Loss for the year

Other comprehensive loss

Amounts allocated to Series D-1, D-2 and Series D-3 Warrants, net

Amounts allocated to issuance of Common Stock from Series D offering

Issuance of shares as settlement of financial liabilities

Warrants issued as consideration for placement services

Stock-based compensation

Issuance of restricted shares as compensation

to the board of directors

Issuance of Common Stock, net

Warrants issued as consideration for placement services

Issuance of restricted shares as compensation to directors

Balance as of December 31, 2020

Balance as of January 1, 2021

Loss for the period

Beginning balance, value

Loss for the year

Other comprehensive loss

Stock-based compensation

Issuance of Common Stock, net

Warrants issued as consideration for placement services

Issuance of restricted shares as compensation

to the board of directors

Issuance of restricted shares as compensation to directors

Balance as of December 31, 2021

Ending balance, value

Less than 1 thousand

accompanying notes are an integral part of the consolidated financial statements.

Application, Inc.

INTEGRITY APPLICATIONS, INC.)

STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

Income (loss) for the year

Adjustments to reconcile income (loss) for the year to net cash used in operating activities:

Loss for the year

Adjustments to reconcile loss for the year to net cash used in operating activities:

Capital loss from sale of property and equipment

Stock-based compensation

Issuance of restricted shares as compensation to the board of directors

Issuance of restricted shares as compensation to directors

Linkage difference on principal of loans from stockholders

Changes in assets and liabilities:

Decrease (increase) in accounts receivable

Decrease in accounts receivable

Decrease (increase) in inventory

Increase in other current assets

Decrease (increase) in other current assets

Decrease in accounts payable

2 unchanged sentences

Cash flows from investment activities:

Proceeds from sale of property and equipment

Purchase of property and equipment

1 unchanged sentence

Cash flows from financing activities

Proceeds allocated to Series D Warrants, net of cash issuance expenses

Proceeds from issuance of Common Stock, net of cash issuance expenses

Proceeds from issuance of common stock, net of cash

issuance costs

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase in cash, cash equivalents, and restricted cash

Change in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of the year

2 unchanged sentences

information on financing activities not involving cash flows:

the year ending December 31, 2019, the Company settled a portion of the outstanding board fees and management payroll obligations

in the amount of $463 thousand through the issuance of 1,795,437 shares of common stock in total to seven board members and three

members of the senior management team.

the years ending December 31, 2020 and 2019, $756 and $249 thousand, respectively, representing the fair value of warrants issued

as consideration for placement agent services.

the years ending December 31, 2021 and 2020, the Company settled a portion of the outstanding board fees in the amount of $ 38 and $ 168

thousand through the issuance of common stock.

the years ending December 2020, $ 756

thousand representing the fair value of warrants

issued as consideration for placement agent services.

This amount was accounted for as warrants with down-round protection.

Upon issuance, the

fair value was recognized as an increase in additional paid in capital.

issuance, the fair value was recognized as an increase in additional paid in capital.

accompanying notes are an integral part of the consolidated financial statements.

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS

Applications, Inc.

(the “Company”) was incorporated on May 18, 2010 under the laws of the State of Delaware.

15, 2010, Integrity Acquisition Corp.

NOTE 1 – GENERAL

Inc (Formerly:

Integrity Applications, Inc.) (the “Company”) was incorporated on May 18, 2010 under the laws of

the State of Delaware.

On July 15, 2010, GlucoTrack Acquisition Corp.

(hereinafter:

“Integrity Acquisition”), a wholly owned Israeli subsidiary

of the Company, which was established on May 23, 2010, completed a merger with A.D.

Integrity Applications Ltd.

“Integrity Acquisition”), a

wholly owned Israeli subsidiary of the Company, which was established on May 23, 2010, completed a merger with A.D.

Integrity Applications

(hereinafter:

“Integrity

Israel”), an Israeli corporation that was previously held by the stockholders of the Company.

Pursuant to the merger, all equity

holders of Integrity Israel received the same proportional ownership in the Company as they had in Integrity Israel prior to the

“Integrity Israel”), an Israeli corporation that was previously held by the stockholders of the Company.

Pursuant to the merger, all equity holders of Integrity Israel received the same proportional ownership in the Company as they had

in Integrity Israel prior to the merger.

Following the merger, Integrity Israel remained a wholly-owned subsidiary of the Company.

As the merger transaction constituted

a structural reorganization, the merger has been accounted for at historical cost in a manner similar to a pooling of interests.

Integrity Israel was incorporated in 2001 and commenced its operations in 2002.

Integrity Israel, a medical device company, focuses

on the design, development and commercialization of non-invasive glucose monitoring devices for use by people with diabetes.

its incorporation, the Company did not conduct any material operations other than those carried out by Integrity Israel.

As the merger transaction constituted a structural reorganization, the merger has been accounted for at historical cost in a manner

similar to a pooling of interests.

Integrity Israel was incorporated in 2001 and commenced its operations in 2002 (The Company

and Integrity Israel are referred as the “Group”) Integrity Israel, a medical device company, focuses on the design,

development and commercialization of non-invasive glucose monitoring devices for use by people with diabetes.

Since its incorporation,

the Company did not conduct any material operations other than those carried out by Integrity Israel.

The development and commercialization

of Integrity Israel’s product is expected to require substantial expenditures.

Integrity Israel and the Company (collectively,

the “Group”) have not yet generated significant revenues from operations, and therefore they are dependent upon external

sources for financing their operations.

As of December 31, 2021, the Group has incurred accumulated deficit of $ 97,466

thousand, and negative operating cash flows.

As of December 31, 2021, the Company had $ 6,062 thousand

in cash, which is sufficient to meet its capital

needs for fiscal 2022 and for at least 12 months from the date of issuance of these financial statements, thus it is expected that

the company will be able to operate as a going concern for at least 12 months from the date hereof.

On December 8, 2021, we announced that our shares of common stock were approved for listing on the Nasdaq Capital Market (“NASDAQ”).

Trading on NASDAQ commenced on December 10, 2021 under its existing trading symbol, IGAP.

On March 14, 2022, we announced that it has completed its corporate name and ticker symbol change on

the Nasdaq Capital Market (from IGAP to GCTK), to be effective at the commencement of trading on March 14, 2022.

In connection with its application to list its shares on Nasdaq Capital Market (“NASDAQ”), as detailed above, on August 13, 2021, the Company

effected a reverse split of its Common Stock in a ratio of 1 for 13 (the “Reverse Share Split”).

For accounting purposes,

all Shares, options and warrants to purchase Common Stock and loss per share amounts have been adjusted to give retroactive effect

to this Reverse Share Split for all periods presented in these consolidated financial statements.

Any fractional shares resulting

from the Reverse Share Split were rounded up to the nearest whole share.

Liquidity and capital resources

its inception date, the Company did not conduct any material operations other than those carried out by Integrity Israel.

The development

and commercialization of Integrity Israel’s product is expected to require substantial expenditures.

Integrity Israel and the

Company (collectively, the “Group”) have not yet generated significant revenues from operations, and therefore they are

dependent upon external sources for financing their operations.

As of December 31, 2020, the Group has incurred accumulated deficit

of $93,399 thousand, and negative operating cash flows.

As of December 31, 2020, the Company had $9,823 in cash, which is sufficient

to meet its capital needs for fiscal 2021 and for at least 12 months from the date of issuance of these financial statements, thus

it is expected that the company will be able to operate as a going concern for at least 12 months from the date hereof.

APPLICATIONS, INC.

and commercialization of the Product is expected to require substantial expenditures.

The Group has not yet generated significant revenues

from operations, and therefore they are dependent upon external sources for financing their operations.

As of December 31, 2021, the

Group has incurred accumulated deficit of $ 97,466 thousand.

During the year ended December 31, 2021 the Company incurred losses from

ongoing operation and has negative cash flow from operating activity.

On February 14, 2020, the Company closed on a

$ 15 million private placement of its common stock, for which it received net cash in excess of $ 13,009 thousand.

on September 27, 2021, the Company’s shelf registration statement on Form S-3 was declared effective by the Securities and Exchange

Commission (SEC) which permits the Company to register up to $ 100,000 thousand of certain equity and debt securities of the Company via

prospectus supplement.

To date, funds have not been raised through this shelf registration statement

The management believes the cash balance amounted to $ 6,062 thousand as of December 31, 2021, is sufficient to

meet its capital needs of the Group for at least 12 months from the issuance date of these consolidated financial statements.

is expected that the Company will be able to operate as a going concern for at least 12 months from the date hereof.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

Group has a limited operating history and faces a number of risks and uncertainties, including risks and uncertainties regarding

continuation of the development process, demand and market acceptance of the Group’s products, the effects of technological

changes, competition and the development of products by competitors.

Additionally, other risk factors also exist, such as the ability

to manage growth and the effect of planned expansion of operations on the Group’s future results and the availability of necessary

In addition, the Group expects to continue incurring significant operating costs and losses in connection with the development

of its products and marketing efforts.

The Group has not yet generated material revenues from its operations to fund its activities

and therefore is dependent on the receipt of additional funding from its stockholders and/or new investors in order to continue

its operations.

NOTE 1 – GENERAL (cont.)

of the spread of the Coronavirus on the Company

December 2019, the Covid-19 epidemic erupted in China (hereinafter - the “Corona Virus”,

the “Event”

or the “Crisis”) and at the beginning of 2020, it spread

to additional countries across the globe.

In January 2020, the World Health Organization

declared the outbreak of Corona as a global health emergency and in March 2020, it declared

the Corona virus to be a global pandemic.

The spreading of the Corona Virus is an extraordinary

macroeconomic event in many countries worldwide.

As a result of the event, many countries,

including Israel, have taken significant steps in an attempt to stem the spreading of the

These steps include, inter alia, restriction of civilian movement and employment,

closure of businesses and malls, restrictions of gatherings and events, restriction of the

transportation of people and goods, closure of international border crossings, reduction

December 2019, the Covid-19 epidemic erupted in China (hereinafter - the “Corona Virus”, the “Event” or the

“Crisis”) and at the beginning of 2020, it spread to additional countries across the globe.

In January 2020, the World

Health Organization declared the outbreak of Corona as a global health emergency and in March 2020, it declared the Corona virus

to be a global pandemic.

The spreading of the Corona Virus is an extraordinary macroeconomic event in many countries worldwide.

a result of the event, many countries, including Israel, have taken significant steps in an attempt to stem the spreading of the

These steps include, inter alia, restriction of civilian movement and employment, closure of businesses and malls, restrictions

of gatherings and events, restriction of the transportation of people and goods, closure of international border crossings, reduction

in the number of employees permitted to come to their workplaces, etc.

The event and the

steps being taken by the various countries, as mentioned above, have had a significant impact

on many global and local economies as well as on global capital markets, characterized by

sharp decreases and extreme volatility in the prices of many securities.

In addition, there

is an ever-increasing risk of a market recession.

a result of the COVID-19 pandemic, as near-term measures, we have transitioned some of our employees to remote working arrangements.

The transition has had little impact on our employee productivity.

Due to the uncertainty of COVID-19, we will continue to assess

the situation, including abiding by any government-imposed restrictions, market by market.

OF SIGNIFICANT ACCOUNTING POLICIES

The event and the steps being taken by the various countries,

as mentioned above, have had a significant impact on many global and local economies as well as on global capital markets, characterized

by sharp decreases and extreme volatility in the prices of many securities.

In addition, there is an ever-increasing risk of a market

a result of the COVID-19 pandemic, as near-term measures, the Company has transitioned some of its employees to remote

working arrangements.

which has had no material impact on the Company’s operations.

Due to the uncertainty of

COVID-19, the Company will continue to assess the situation, including abiding by any government-imposed restrictions, market

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States

of America (US GAAP).

of estimates in the preparation of financial statements

Use of estimates in the preparation of financial statements

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts

of revenues and expenses during the reporting periods.

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the

reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

applicable to the consolidated financial statements, the most significant estimates and assumptions relate to the going concern

Functional currency

functional currency of the Company is the US dollar, which is the currency of the primary economic environment in which it operates.

In accordance with ASC 830, “Foreign Currency Matters”

(ASC 830), balances denominated in or linked to foreign currency

In accordance with ASC 830, “Foreign Currency Matters” (ASC 830), balances denominated in or linked to foreign currency

are stated on the basis of the exchange rates prevailing at the applicable balance sheet date.

3 unchanged sentences

arising from changes in the exchange rates used in the translation of such transactions are carried as financing income or expenses.

The functional currency of Integrity Israel is the New Israeli Shekel (“NIS”) and its financial statements are included

in consolidation, based on translation into US dollars.

1 unchanged sentence

using year-end exchange rates, and income and expense items were translated at average exchange rates during the year.

Gains or losses

resulting from translation adjustments are reflected in stockholders’

deficit, under “accumulated other comprehensive

income (loss)”.

losses resulting from translation adjustments are reflected in stockholders’ equity, under “accumulated other

comprehensive income (loss)”.

OF OFFICIAL EXCHANGE RATE

Official exchange rate of NIS 1 to US dollar

Increase (decrease) of the Official exchange rate of NIS 1 to US dollar during the year:

APPLICATIONS, INC.

Increase (decrease) of the official exchange rate of NIS 1 to US dollar during

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

of consolidation

2 unchanged sentences

have been eliminated in consolidation.

and cash equivalents

Cash and cash equivalents

Group considers all short-term investments, which are highly liquid investments with original maturities of three months or less

5 unchanged sentences

costs, including materials, labor, subcontracting costs and other direct manufacturing costs.

evaluates whether inventory reserve for slow-moving or obsolete items is required.

and equipment, net

Management evaluated

periodically whether inventory is required to be written-down due to slow-moving or obsolete items and recognize

inventory impairment, as applicable

Property and equipment, net

and equipment are stated at cost, net of accumulated depreciation.

5 unchanged sentences

of depreciation:

Furniture and office equipment

Leasehold improvements

Shorter of lease term

of long-lived assets

Group’s long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment”,

OF PROPERTY AND EQUIPMENT, RATES OF DEPRECIATION

and office equipment

of lease term

Impairment of long-lived assets

Group’s long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment”,

whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

6 unchanged sentences

losses related to long lived assets.

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Restricted cash

cash is invested in certificates of deposit, which are used to secure Integrity Israel’s

obligations in respect of its headquarters (See Note 9B) lease and credit card.

cash is invested in certificates of deposit, which are used to secure Integrity Israel’s

obligations in respect of its headquarters lease and credit card (See also Note 8B).

presentation of statement of cash flows purposes, restrict cash balances are included with cash and cash equivalents, when reconciling

the reported period total amounts.

OF RESTRICT CASH BALANCES ARE INCLUDED WITH CASH AND CASH EQUIVALENTS

In thousand of US dollars

Cash and cash equivalents

1 unchanged sentence

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

Group accounts for income taxes in accordance with ASC 740, “Income Taxes”.

Accordingly, deferred income taxes are determined

6 unchanged sentences

Group accounts for uncertain tax positions in accordance with ASC Topic 740-10, which prescribes detailed guidance for the financial

statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements.

According to ASC Topic 740-10, tax positions must meet a more- likely-than-not recognition threshold.

The Group’s accounting

policy is to classify interest and penalties relating to uncertain tax positions under income taxes, however the Group did not recognize

1 unchanged sentence

position in its balance sheet.

for employee rights upon retirement

Israel’s liability for employee rights upon retirement with respect to its Israeli employees is calculated pursuant to the

Liability for employee rights upon retirement

Israel’s liability for employee rights upon retirement with respect to its Israeli employees is calculated pursuant to the

Israeli Severance Pay Law, based on the most recent salary of each employee multiplied by the number of years of employment of each

such employee as of the balance sheet date.

Employees are entitled to one month’s salary for each year of employment, or ratable

portion thereof for periods less than one year.

Integrity Israel makes monthly deposits to insurance policies and severance pay funds.

deposited funds may be withdrawn upon the fulfillment of Integrity Israel’s severance obligations pursuant to Israeli severance

pay laws or labor agreements with its employees.

1 unchanged sentence

and includes immaterial profits or losses.

in 2011, Integrity Israel’s agreements with its Israeli employees are in accordance with Section 14 of the Severance Pay Law.

Payments in accordance with Section 14 release the employer from any future severance payments in respect of those employees.

obligations and liabilities under Section 14 are not recorded as an asset or as a liability in the Company’s balance sheet.

expenses for the year ended December 31, 2020, and 2019 amounted to $24 and $79 thousand respectively.

Company derives most of its revenues from sales of its GlucoTrack®

glucose monitoring device to distributors.

Company’s products sold through agreements with distributors are generally non-exchangeable, non-refundable and non-returnable

and, to date, the Company has not granted to any of its distributors any rights of price protection or stock rotation.

the Company considers its distributors as end-users for revenue recognition purposes.

January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers

(“ASC 606”).

In accordance with ASC 606, The Company determines revenue recognition

through the following five steps:

Identification of the contract, or contracts, with a customer;

Identification of the performance obligations in the contract;

Determination of the transaction price;

Allocation of the transaction price to the performance obligations in the contract;

Recognition of revenue when, or as, the Company satisfies a performance obligation.

contract with a customer exists when all of the following criteria are met:

the parties to the contract have approved it (in

writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations,

the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“performance

obligations”), the Company can determine the transaction price for the goods or services to be transferred, the contract

has commercial substance and it is probable that the Company will collect substantially all of the consideration to which it

will be entitled in exchange for the goods or services that will be transferred to the customer.

are recognized when, or as, control of services or products is transferred to the customers at a point in time or over time,

as applicable to each performance obligation.

are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations

upon transfer of control to the customer, excluding amounts collected on behalf of other third parties and sales taxes.

from sales of GlucoTrack devices are recognized when the control of the product passed to the customer (usually upon delivery).

APPLICATIONS, INC.

obligations and liabilities under Section 14 are not recorded as an asset or as a liability in the Company’s balance sheet.

year ended December 31, 2021, and 2020, severance expenses amounted to $ 43

and $ 24 thousand,

respectively.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

and development expenses

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Research and development expenses

and development expenses are charged to operations as incurred.

Royalty-bearing

Royalty-bearing grant s

Royalty-bearing

grants from the OCS to fund approved research and development projects are recognized at the time Integrity Israel is entitled to

such grants, on the basis of the costs incurred and reduce research and development costs.

The cumulative research and development

grants received by Integrity Israel from inception through December 2004 amounted to $93 thousand.

Integrity Israel has not received

any research and development grants since December 2004.

grants from the Israeli Innovation Authority (IIA) to fund approved research and development projects are recognized at the time

Integrity Israel is entitled to such grants, on the basis of the costs incurred and reduce research and development costs.

the cumulative research and development grants received by Integrity Israel from amounted to $ 93 thousand.

Group provides a 24-month warranty for its products at no cost.

The Group estimates the costs that may be incurred during the warranty

period and records a liability for the amounts of such costs at the time revenues are recognized.

For the year ended December 31,

2020 and 2019 warranty expenses were clearly insignificant.

and diluted income (loss) per share

income (loss) per share is computed by dividing the income (loss) for the period applicable

for Common Stockholders by the weighted average number of shares of Common Stock outstanding

during the period.

Securities that may participate in dividends with the Common Stock are

considered in the computation of basic income per share using the two-class method.

in periods of net loss, such participating securities are not included since the holders

of such securities do not have a contractual obligation to share the losses of the Company.

the reported period, there were no such participating securities.

The group estimates the costs that may be incurred during

the warranty period and records a liability for the amounts of such costs at the time revenues are recognized.

For the year ended

December 31, 2021 and 2020 warranty expenses were clearly insignificant.

Basic and diluted loss per share

Basic loss per share is computed by dividing the loss for the period applicable

for Common Stockholders by the weighted average number of shares of Common Stock outstanding during the period.

computing, diluted loss per share, basic earnings per share are adjusted to reflect the potential dilution that could occur upon

the exercise of options or warrants issued or granted using the “treasury stock method”

and upon the conversion of Preferred

Stock using the “if-converted method”, if the effect of each of such financial instruments is dilutive.

the exercise of options or warrants issued or granted using the “treasury stock method”, if the effect of each of such

financial instruments is dilutive.

In computing diluted loss per share, the average stock price for the

period is used in determining the number of common stock assumed to be purchased from the exercise of stock options or stock warrants.

Shares that will be issued upon exercise of all stock

options and stock warrants, have been excluded from the calculation of the diluted net loss per share for all the reported periods

for which net loss was reported because the effect of the common shares issuable as a result of the exercise or conversion of these

instruments was anti-dilutive

An amount of 6,404,238 and 6,446,920 outstanding stock

options and stock warrants have been excluded from the calculation of the diluted net loss per share for the years ended December

31, 2021 and 2020, respectively, because the effect of the common shares issuable as a result of the exercise of such instruments

was determined to be anti-dilutive.

Stock-based compensation

Group measures and recognizes the compensation expense for all equity-based payments to employees based on their estimated fair values

in accordance with ASC 718, “Compensation-Stock Compensation”.

Share-based payments including grants of stock options

4 unchanged sentences

service period when a performance condition affects the vesting, and it is considered probable that the performance condition will

December 31, 2018 the Company applied ASC 505-50, “

Equity-Based Payments to Non-Employees ”

(“ASC 505”)

with respect to options and warrants issued to non-employees, which required the use of option valuation models to measure the fair

value of the options and warrants at the measurement date.

Commencing January 1, 2019, following the adoption of ASU 2018-07, which

aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments

to employees (with certain exceptions), share-based payments to non-employees are accounted in accordance with ASC 718.

APPLICATIONS, INC.

January 1, 2019, following the adoption of ASU 2018-07, which aligns the measurement and classification guidance for share-based

payments to nonemployees with the guidance for share-based payments to employees (with certain exceptions), share-based payments

to non-employees are accounted in accordance with ASC 718.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

value of financial instruments

Topic 825-10, “Financial Instruments”

defines financial instruments and requires disclosure of the fair value of financial

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Fair value of financial instruments

Topic 825-10, “Financial Instruments” defines financial instruments and requires disclosure of the fair value of financial

instruments held by the Group.

10 unchanged sentences

under the fair value hierarchy.

Group did not estimate the fair value of the long-term loans from stockholders since their repayment schedule has not yet been determined.

Concentrations

of credit risk

instruments that potentially subject the Group to concentrations of credit risk consist primarily of cash and cash equivalents, accounts

receivable, and restricted cash.

Cash and cash equivalents and restricted cash are deposited with major banks in Israel and the United

States of America.

Management believes that such financial institutions are financially sound, accordingly, minimal credit risk exists

with respect to these financial instruments.

The Group does not have any significant off-balance-sheet concentration of credit risk,

such as foreign exchange contracts, option contracts or other foreign hedging arrangements.

of December 31, 2020, the balances of accounts receivable was not material and accordingly such balances do not represent substantial

concentration of credit risk.

Group did not estimate the fair value of the loans from stockholders since their repayment schedule has not yet been determined.

Concentrations of credit risk

instruments that potentially subject the Group to concentrations of credit risk consist primarily of cash and cash equivalents, and

restricted cash.

Cash and cash equivalents and restricted cash are deposited with major banks in Israel and the United States of

Management believes that such financial institutions are financially sound, accordingly, minimal credit risk exists with

respect to these financial instruments.

The Group does not have any significant off-balance-sheet concentration of credit risk, such

as foreign exchange contracts, option contracts or other foreign hedging arrangements.

Contingencies

4 unchanged sentences

Legal costs incurred in connection with loss contingencies are expensed as incurred.

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

with Down-Round Protection

January 1, 2018 and following the early adoption of Accounting Standard Update (ASU) No.

2017-11, “Earnings Per Share”

(ASU 2017-11), the Company disregard the down round

feature when assessing whether the instrument is indexed to its own stock, for purposes of

determining liability or equity classification.

Based on its evaluation, management has determined

that such warrants with Down-Round Protection are eligible for equity classification.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Warrants with Down-Round Protection

the application of Accounting Standard Update (ASU) No.

2017-11, “Earnings Per Share” (ASU 2017-11), the Company disregard

the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or

equity classification.

Based on its evaluation, management has determined that such warrants with Down-Round Protection are eligible

for equity classification.

accordance with the provisions of ASU 2017-11, upon the occurrence of an event that triggers a down round protection (i.e., when

the exercise price of the warrants is adjusted downward because of the down round feature), the effect is accounted for as a

deemed dividend and as a reduction of income available to common shareholders for purposes of basic earnings per share (EPS)

of equity-classified contracts

the exercise price of the warrants is adjusted downward because of the down round feature), the effect is accounted for as a deemed

dividend and as a reduction of income available to common shareholders for purposes of basic earnings per share (EPS) calculation.

Modification of equity-classified contracts

modification or exchange of equity-classified contracts, such as warrants that were classified as equity before the modification

2 unchanged sentences

Accordingly, the incremental fair value from the modification or exchange (the change in the fair value

of the instrument before and after the modification or exchange) is recognized as a reduction of, retained earnings (accumulated

deficit) as a deemed dividend.

Modifications or exchanges that result in a decrease in the fair value of an equity-classified share-based

payment awards are not recognized.

In addition, the amount of the deemed dividend is also recognized as an adjustment to earnings

available to common shareholders for purposes of calculating earnings per share.

Company entered into several non-cancelable lease agreements for real estate, and vehicles for use in its operations, which are classified

as operating leases.

January 1, 2019, the Company adopted ASC Update 2016-02, Leases (Topic 842).

Company used the effective date as the date of initial application.

Consequently, the effect of the adoption was reflected through a

cumulative-effect adjustment.

However, the adoption did not affect the financial statements.

of the instrument before and after the modification or exchange) is recognized as a reduction of retained earnings of increase

of accumulated deficit as a deemed dividend.

Modifications or exchanges that result in a decrease in the fair value of an equity-classified

share-based payment awards are not recognized.

In addition, the amount of the deemed dividend is also recognized as an adjustment

to earnings available to common shareholders for purposes of calculating earnings per share.

Allowance for doubtful accounts

The allowance for doubtful accounts is determined with

respect to amounts the Company has determined to be doubtful of collection, in order to reflect the expected credit losses on accounts

receivable balances.

Judgment is required in the estimation of the allowance for doubtful accounts and the Company evaluates the

collectability of its accounts receivable based on a combination of factors (including, among other things, the length of time that

the balance is past due and the customer’s current ability to pay.

If it’s becomes aware of a customer’s inability to meet

its financial obligations, an allowance is recorded to reduce the net receivable to the amount reasonably believed to be collectible

from such customer

Operating Lease

Company entered into several non-cancelable lease agreements for vehicles for use in its operations, which are classified as operating

January 1, 2019, the Company applies ASC Update 2016-02, Leases (Topic 842).

Company determines if an arrangement is a lease at inception.

6 unchanged sentences

economic life of the underlying assets).

present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially

all of the fair value of the underlying asset (Generally, 90% or more of the fair value of the underlying asset).

present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all

of the fair value of the underlying asset (Generally, 90% or more of the fair value of the underlying asset).

underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease

1 unchanged sentence

Otherwise, the lease is classified as an operating lease.

are recorded on the consolidated balance sheet as both a right of use

asset and a lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or

the Company’s incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each period, and

the right of use asset is amortized over the lease term.

For operating leases, interest on the lease liability and the amortization of

the right of use asset results in straight-line rent expense over the lease term.

Variable lease expenses, if any, are recorded when

are recorded on the consolidated balance sheet as both a right of use asset and a lease liability, calculated by discounting fixed lease

payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Lease liabilities are

increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term.

For operating

leases, interest on the lease liability and the amortization of the right of use asset results in straight-line rent expense over the

Variable lease expenses, if any, are recorded when incurred.

Company also elected the short-term lease recognition exemption for all leases that qualify (leases with a term shorter than 12 months).

For those leases, right-of-use assets or lease liabilities are not recognized and rent expense is recognized on a straight-line

basis over the lease term.

For those leases, right-of-use assets or lease liabilities are not recognized and rent expense is recognized on a straight-line basis

over the lease term.

Company had no material capital leases throughout the reporting periods.

note 4 for further discussion.

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications did not have

significant effect on the reported results of operations, shareholder’s deficit or cash flows.

issued accounting pronouncements not yet adopted

Standards Update 2016-13, “Financial Instruments –

Credit Losses (Topic 326):

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Reclassification

comparative figures have been reclassified to conform to the current year presentation.

Such reclassifications did not have any significant

impact on the Company’s equity, net income or cash flows.

Recent Accounting Pronouncements

June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments”

June 2016, The FASB has issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

(“ASU 2016-13”).

ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial

instruments held by financial institutions and other organizations.

2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical

experience, current conditions, and reasonable and supportable forecasts.

Financial institutions and other organizations will

now use forward-looking information to better inform their credit loss estimates.

of the loss estimation techniques applied today are still permitted, although the inputs to those techniques will change to

reflect the full amount of expected credit losses.

Organizations will continue to use judgment to determine which loss estimation

method is appropriate for their circumstances.

2016-13 requires enhanced disclosures to help investors and other financial statement users better understand significant estimates

and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s

These disclosures include qualitative and quantitative requirements that provide additional information about the

amounts recorded in the financial statements.

addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets

with credit deterioration.

November 2019, the FASB issued ASC Update Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic

815), and Leases (Topic 842) –

Effective dates, which, among other provisions the effective date of ASU 2016-13 was amended

Public business

entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (SRCs) as defined by

the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

All other entities

for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

the company is eligible to considered as smaller reporting company ASU 2016-13 is effective for fiscal years beginning after December

15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The adoption of this standard is

not expected to result in a material impact to the Company’s financial statements.

APPLICATIONS, INC.

Instruments” (“ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new

forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses.

guidance also requires increased disclosures.

For the Company, the amendments in the update were originally effective for fiscal years

beginning after December 15, 2019, including interim periods within those fiscal years.

In November 2019, the FASB issued ASU No.

which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the SEC) and other non-SEC reporting entities

to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods.

Early adoption is permitted.

As the company

is eligible to considered as smaller reporting company ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including

interim periods within those fiscal years.

The adoption of this standard is not expected to result in a material impact to the Company’s

financial statements.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

3 – INVENTORIES

OF INVENTORIES

In thousand of US dollars

4 unchanged sentences

Finished products

NOTE 4 –

Company has entered into several non-cancellable operating lease agreements for the Company’s offices and three vehicles.

the Company’s

leases have original lease periods expiring between 2020 and 2023.

inventory write-down

Management evaluated periodically whether inventory is required to be written-down due to slow-moving or obsolete items

and recognize inventory impairment, as applicable.

As a result of the development of the second generation of the glucose monitoring

device the Group has recorded in the fourth quarter of 2021 inventory written-down in the amount of approximately $ 321

Company has entered into several non-cancellable operating lease agreements for few vehicles.

the Company’s leases have

original lease periods expiring between 2023 and 2024.

Payments due under such lease contracts include primarily fixed payments.

the Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably assured at

lease commencement.

the company’s lease agreements do not contain any material residual value guarantees or material restrictive

Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably assured at lease

commencement.

the company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

components of lease costs, lease term and discount rate are as follows:

In thousand of

OF LEASE COSTS, LEASE TERM AND DISCOUNT

Operating lease cost:

Office space :

Over 12 month

Short term leases

Remaining Lease Term

Weighted Average Discount Rate

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

1 unchanged sentence

following is a schedule, by years, of maturities of operating lease liabilities as of December 31, 2021:

In thousand of

OF OPERATING LEASE MATURITY PAYMENTS

December 31, 2021

2 unchanged sentences

Present value of lease liabilities

AND EQUIPMENT, NET

5 – PROPERTY AND EQUIPMENT, NET

OF PROPERTY AND EQUIPMENT, NET

Property and Equipment

4 unchanged sentences

Leasehold improvements

accumulated depreciation

the years ended December 31, 2020 and 2019, depreciation expenses amounted to $47 and $51 thousand respectively, and new equipment

purchases amounted to $53 and $23 thousand, respectively.

CURRENT LIABILITIES

Property and equipment, gross

Less – accumulated depreciation

Property and equipment,

the years ended December 31, 2021 and 2020, depreciation expenses amounted to $ 42

thousand respectively, and new equipment

purchases amounted to $ 5

thousand, respectively.

6 – OTHER CURRENT LIABILITIES

OF OTHER CURRENT LIABILITIES

Other Current Liabilities

In thousand of US dollars

3 unchanged sentences

Accrued expenses and other

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

of December 31, 2020, the Group did not have a credit line with any institution.

7 – LOANS FROM STOCKHOLDERS

the years 2003-2004, Integrity Israel received loans from stockholders (four separate lenders) in a total amount of approximately

$400 thousand.

However, following the repayment of the entire balance to creatio1n lender in 2015, the remaining balance as of December

31,2020 is approximately $197 thousand.

The loans are indexed to the Israeli consumer price index from their origination date and

near no insert.

However, following the repayment

of the entire balance to certain lender in 2015, the remaining balance as of December 31,2021 is approximately $ 210

The loans are indexed to the Israeli

consumer price index from their origination date and bear no insert.

Group will be required to pay the loans, in quarterly installments, commencing on the first quarter following the first fiscal year

1 unchanged sentence

At such time, the Group will be required to make quarterly payments equal

to 10% of its total sales for each quarter until the loans have been repaid in full.

Notwithstanding the repayment mechanism, the

Group will not be required to repay the loans during any period in which such payment would cause a deficit in the Group’s

working capital.

of its total sales for each quarter until the loans have been repaid in full.

Notwithstanding the repayment mechanism, the Group

will not be required to repay the loans during any period in which such payment would cause a deficit in the Group’s working

of December 31, 2021, the Group does not expect to make any additional material repayments during the following 12-month period,

if any, and accordingly the entire remaining balance of the loans from stockholders have been presented as long-term liabilities.

APPLICATIONS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

AND CONTINGENT LIABILITIES

March 4, 2004, the OCS provided Integrity Israel with a grant of approximately $93 thousand (NIS 420 thousand), for its plan to develop

a non-invasive blood glucose monitor (the “Development Plan”).

Integrity Israel is required to pay royalties to the OCS

at a rate ranging between 3-5% of the proceeds from the sale of the Group’s products arising from the Development Plan up to

an amount equal to $93 thousand, plus interest at LIBOR from the date of grant.

As of December 31, 2020, the remaining contingent

liability with respect to royalty payment on future sales equals approximately $43 thousand, excluding interest.

Such contingent

obligation has no expiration date.

of December 31, 2020, and 2019, the Group accrued royalties to the OCS in insignificant amounts.

Israel leases approximately 5,500 sq.

of office space in the city of Ashdod, Israel for its principal offices.

The lease term

began on December 1, 2015 for a period of 5 years which has been extended on august 2020 for an additional 1 year at the option of

Monthly lease payments including maintenance approximate $10 thousand.

The Company estimates that its minimal rent and

maintenance payments for the remaining original lease term, will approximate $120 thousand Per year over each of the next 9 months.

In connection with the lease agreement, Integrity Israel provided the landlord a bank guarantee in the amount of approximately $43

(NIS 137 thousand.) that can be exercised by the landlord in the case Integrity Israel fails to pay the monthly rent payments.

The guarantee is renewed on an annual basis for a period of 4 years and is secured by funds on deposit with the bank, which generally

must be sufficient to cover the principal amount guarantee.

August 1, 2017 the Company entered into an Advisory Agreement with AGI, pursuant to which the Company retained AGI on a non-exclusive

basis to provide certain advisory services to the Company for a period of 9 months which was subsequently extended twice and was

in effect to October 31, 2019.

Company paid the Placement Agent approximately $2 million for placement services.

thousand for placement services and Advisory services (see above) in cash during 2020 and

addition, during the year ending December 31, 2020 and 2019, $756 and $249 thousand, respectively, representing the fair

value of warrants issued as consideration for placement agent services to AGI.

This amount was accounted for as Warrants with

down-round protection.

8 – COMMITMENTS AND CONTINGENT LIABILITIES

March 4, 2004, the Israel innovation authority (IIA) provided Integrity Israel with a grant of approximately $ 93

thousand (NIS 420

thousand), for its plan to develop a non-invasive

blood glucose monitor (the “Development Plan”).

Integrity Israel is required to pay royalties to the IIA at a

rate ranging between 3 - 5 %

of the proceeds from the sale of the Group’s products arising from the Development Plan up to an amount equal to $ 93

thousand, plus interest at LIBOR from the date of grant.

of December 31, 2021, the remaining contingent liability with respect to royalty payment on future sales equals approximately $ 43

thousand, excluding interest.

Such contingent obligation has

no expiration date.

of December 31, 2021, the Group accrued royalties to the IIA in insignificant amounts.

August 1, 2017 the Company entered into an Advisory Agreement with Andrew Garrett, Inc.

(AGI), pursuant to which the

Company engaged AGI as placement agent on a non-exclusive basis to provide certain advisory services to the Company for a period

of 9 months which was subsequently extended twice and was in effect until October 31, 2019 .

the year ended December 31, 2020 the Company paid the placement Agent approximately $ 2

million for placement services (see above)

In addition, during the year ended December 31, 2020, $ 756

thousand representing the fair value of warrants

issued as consideration for placement agent services to AGI.

This amount was accounted for as warrants with down-round protection.

Upon issuance, the fair value was recognized as an increase in additional paid in capital.

APPLICATIONS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

STOCK, AND WARRANTS WITH-DOWN ROUND PROTECTION

Since March 2021 Integrity Israel is renting several workspaces

at office building in the city Or – Yehoda.

This workspace rent replaces the principal offices the Company in the city Ashdod.

According to the new agreement the Company renting those flexible shared workspaces for period shorter than one year.

9 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION

of the rights attached to the Common Stock

share of Common Stock entitles the holder to one vote, either in person or by proxy, on each matter submitted to the approval of

the Company’s stockholders.

The holders of Common Stock are not permitted to vote their shares cumulatively.

of the Series D units

of the Series D Units of the Company (each a “Unit”

and, collectively, the “Units”), each consisted of (a)

one share (collectively, the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common

Stock”), (b) a five year warrant to purchase, at an exercise price of $4.50 per share, one share of Common Stock (collectively,

the “Series D-1 Warrants”), (c) a five year warrant to purchase, at an exercise price of $5.75 per share, one share of

Common Stock (collectively, the “Series D-2 Warrants”), and (d) a five year warrant to purchase, at an exercise price

of $7.75 per share, one share of Common Stock (collectively, the “Series D-3 Warrants”, and together with the Series

D-1 Warrants and Series D-2 Warrants, the “Warrants”).

APPLICATIONS, INC.

Description of February 14, 2020 Issuance of common

On February 14, 2020, the Company

entered into a Securities Purchase Agreement and Registration Rights Agreement with an accredited

investor, pursuant to which the accredited investor purchased 2,884,615 shares of the Company’s

common stock, par value $ 0.001 per share, for an aggregate gross purchase price of $ 15 million,

less cash expenses of approximately $ 2 million

Placement Agent Compensation

to a placement agent agreement (the “Placement Agent Agreement”) with the placement agent for the Offering (the “Placement

Agent”), at the closing of the above mentioned sale of the common stock the Company paid the Placement Agent, as a commission,

a cash amount equal to 7 % of the aggregate sales price of the Units, plus 3% of the aggregate sales price as a management fee plus

a non-accountable expense allowance equal to 3 % of the aggregate sales price of the Units.

In addition, pursuant to the placement

agent agreement, the company is required to issue to the Placement Agent warrants to purchase up to such number of shares of Common

Stock equal to 10 % of the aggregate Shares sold in the Offering plus warrants equal to 10% of the total number of the Warrants issued

to the Purchasers in the Offering (collectively, the “Placement Agent Warrants”).

The terms of the Placement Agent Warrants

will be substantially similar to the Warrants except that the Placement Agent Warrants will also be exercisable on a cashless basis

and will include full ratchet anti-dilution protection.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

STOCK, PREFERRED STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

of the rights attached to the Series D Units (cont.)

Agent Compensation

to a placement agent agreement (the “Placement Agent Agreement”) with the placement agent for the Offering (the “Placement

Agent”), at the closing of the sale of the Units the Company paid the Placement Agent, as a commission, a cash amount equal

to 7% of the aggregate sales price of the Units, plus 3% of the aggregate sales price as a management fee plus a non-accountable

expense allowance equal to 3% of the aggregate sales price of the Units.

In addition, pursuant to the placement agent agreement,

the company is required to issue to the Placement Agent warrants to purchase up to such number of shares of Common Stock equal to

10% of the aggregate Shares sold in the Offering plus warrants equal to 10% of the total number of the Warrants issued to the Purchasers

in the Offering (collectively, the “Placement Agent Warrants”).

The terms of the Placement Agent Warrants will be substantially

similar to the Warrants except that the Placement Agent Warrants will also be exercisable on a cashless basis and will include full

ratchet anti-dilution protection.

9 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

to non-employees

connection with the 2017 Offering, the Company has issued to the Placement Agent (a) 5-year warrants to purchase up to 13,815,322

shares of Common Stock at an exercise price of $0.258 per share, (b) 5-year warrants to purchase up to 108,305 shares of Common Stock

at an exercise price of $1.80 per share.(c) 5-year warrants to purchase up to 108,305 shares of Common Stock at an exercise price

of $3.60 per share, and (d) 5-year warrants to purchase up to 108,305 shares of Common Stock at an exercise price of $5.40 per share.

The terms of the Placement Agent warrants are substantially similar to the terms of the Series D Warrants except that the Placement

Agent warrants may also be exercisable on a cashless basis at all times.

connection with the 2017 Offering, the Company has issued to the Placement Agent (a) 5 -year

warrants to purchase up to 1,062,717

shares of Common Stock at an exercise price

per share, (b) 5 -year

warrants to purchase up to 108,305

shares of Common Stock at an exercise price

per share.(c) 5 -year

warrants to purchase up to 8,331

shares of Common Stock at an exercise price

per share, and (d) 5 -year

warrants to purchase up to 8,331

shares of Common Stock at an exercise price

The terms of the Placement Agent

warrants are substantially similar to the terms of the Series D warrants except that the Placement Agent warrants may also be exercisable

on a cashless basis at all times.

connection with February 2020 Offering, the Company has issued to the Placement Agent 5 -year

warrants to purchase up to 3,750,000 shares of Common Stock at an exercise price of $0.4

the year ending December 31, 2020 and 2019, $756 and $249 thousand, respectively, representing the fair value of warrants issued

as consideration for placement agent services to AGI.

This amount was accounted for as Warrants with down-round protection.

issuance, the fair value was recognized as an increase in additional paid in capital

of December 31, 2020, and 2019, the key inputs used in the fair value calculations of the warrant that were affected by the down-round

protection were as follows:

Fair value calculations –

warrants to purchase up to 288,462

of Common Stock at an exercise price of $ 5.2

the year ending December 31, 2020, $ 756

thousand, respectively, representing the

fair value of warrants issued as consideration for placement agent services to AGI.

This amount was accounted for as Warrants with

down-round protection.

Upon issuance, the fair value was recognized as an increase in additional paid in capital

of December 31, 2020, the key inputs used in the fair value calculations of the warrant that were affected by the down-round protection

were as follows:

OF FAIR VALUE ASSUMPTIONS

Fair value calculations – Warrant

Dividend yield (%)

5 unchanged sentences

Fair value (US dollars)

August 2007, Integrity Israel’s Board of Directors (“Integrity Israel’s Board”) approved a stock option plan

(“Integrity Israel’s plan”) for the grant, without consideration of options exercisable into ordinary shares of

NIS 0.01 par value of Integrity Israel to employees, officers and directors of Integrity Israel.

The exercise price and vesting period

for each grantee of options was determined by Integrity Israel’s Board and specified in such grantee’s option agreement.

The options vested over a period of 1-12 quarters based on each grantee’s option agreements.

August 2007, Integrity Israel’s Board of Directors (“Integrity Israel’s Board”) approved a stock option plan

(“Integrity Israel’s plan”) for the grant, without consideration of options exercisable into ordinary shares of

par value of Integrity Israel to employees,

officers and directors of Integrity Israel.

The exercise price and vesting period for each grantee of options was determined by Integrity

Israel’s Board and specified in such grantee’s option agreement.

options vested over a period of 1-12 quarters based on each grantee’s option agreements.

Any option not exercised within 10

years after the date of grant thereof will expire .

APPLICATIONS, INC.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

STOCK, PREFERRED STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

9 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

compensation (cont.)

to employees (cont.)

July 2010, following the merger with Integrity Israel, the Company adopted the 2010 Share Incentive Plan (the “2010 Share Incentive

Plan”), pursuant to which the Company’s Board of Directors is authorized to grant options exercisable into Common Stock

July 2010, following the merger with Integrity Israel, the Company adopted the 2010 Share Incentive Plan (the “2010 Share Incentive

Plan”), pursuant to which the Company’s Board of Directors is authorized to grant options exercisable into Common Stock

of the Company.

2 unchanged sentences

Plan and to replace all options granted in the past by Integrity Israel.

January 1, 2019, the company issued a ten-year non-qualified stock option to our former President, for the purchase of 75

thousand shares of Common Stock at an exercise price of $4.50 per share, with three-year quarterly vesting commencing on the first

quarter after the effective date.

June, 2020, Erez Ben-Zvi has joined the Company

as its Vice President of Product , Mr.

will lead all sales and marketing activities for Integrity and will serve on the Company’s

executive leadership team.

June, 2020, Erez Ben-Zvi has joined the Company as its Vice President of Product.

February 8, 2021, the Company announced that it has promoted Erez Ben-Zvi to General Manager in addition to his current role as Vice

President of Product, effective immediately

Company granted Mr.

Ben-Zvi annual award of NIS 210 thousand worth (approximately

$ 61 thousand) of restricted stock units (the “RSU”) effective as of the employee Start Date and on each one-year

anniversary following the employee Start Date subject to the approval of the board of directors (the “additional RSU”).

The RSU and each of the Additional RSU (if approved by the board of directors), as applicable, shall be based on the stock price

at actual the date of grant (and not lower than US$ 0.40 per share).

1/12 of the RSUs shall vest and become nonforfeitable three

months following the Start Date, and an additional 1/12 of the RSUs shall vest and become nonforfeitable at the end of every

3-months period thereafter, provided that the employee continues to be employed by the Company at the applicable date

The vesting schedule shall be also applied to each of the Additional RSUs granted, mutatis mutandis, such that the

vesting period of each of the respective Additional RSU shall commence from its actual date of grant

Ben-Zvi annual award of NIS 210

thousand worth (approximately $ 65

thousand) of restricted stock units (the

“RSU”) effective as of the employee Start Date and on each one-year anniversary following the employee Start Date subject

to the approval of the board of directors (the “additional RSU”).

The RSU and each of the Additional RSU (if approved

by the board of directors), as applicable, shall be based on the stock price at actual the date of grant (and not lower than US$

5.20 per share).

of the RSUs shall vest and become nonforfeitable three months following the Start Date, and an additional 1/12 of the RSUs shall

vest and become nonforfeitable at the end of every 3-months period thereafter, provided that the employee continues to be employed

by the Company at the applicable date of vesting .

The vesting schedule shall be also applied to each of the Additional RSUs granted, mutatis mutandis, such that the vesting period

of each of the respective Additional RSU shall commence from its actual date of grant

November, 2020, Mr.

1 unchanged sentence

Shushan will lead all technology and research and development activities for Integrity

and will serve on the Company’s executive leadership team.

Company granted Mr.

Shushan annual award of NIS 90 thousand worth (approximately $27 thousand) of restricted stock units (the

“RSU”) effective as of the employee Start Date.

Furthermore, on each one-year anniversary following the employee

Start Date subject to the approval of the board of directors, Company shall grant the Employee with NIS 60 thousand worth of

restricted stock units (the “Additional RSU’’).

Both the RSU and each of the Additional RSU (if approved by

the board of directors), as applicable, shall be based on the stock price at actual the date of grant (and not lower than

US$ 0.40 per share).

1/12 of the RSUs shall vest and become nonforfeitable three months following the Start Date, and an additional

1/12 of the RSUs shall vest and become nonforfeitable at the end of every 3-months period thereafter, provided that the Employee

continues to be employed by the Company at the applicable date of vesting.

The vesting schedule shall be also applied to each

of the Additional RSUs granted to the Employee, mutatis mutandis, such that the vesting period of each of the respective Additional

RSU shall commence from its actual date of grant

Shushan annual award of NIS 90

thousand worth (approximately $ 28

thousand) of restricted stock units (the

“RSU”) effective as of the employee Start Date.

Furthermore, on each one-year anniversary following the employee Start

Date subject to the approval of the board of directors, Company shall grant the Employee with NIS 60 thousand worth of restricted

stock units (the “Additional RSU’’).

Both the RSU and each of the Additional RSU (if approved by the board of directors),

as applicable, shall be based on the stock price at actual the date of grant (and not lower than US$ 5.20 per share).

of the RSUs shall vest and become nonforfeitable three months following the Start Date, and an additional 1/12 of the RSUs shall

vest and become nonforfeitable at the end of every 3-months period thereafter, provided that the Employee continues to be employed

by the Company at the applicable date of vesting .

The vesting schedule shall be also applied to each of the Additional RSUs granted to the Employee, mutatis mutandis, such that the

vesting period of each of the respective Additional RSU shall commence from its actual date of grant

October 19, 2021, Paul V.

Goode was appointed as President and Chief Operating Officer of

the company, Inc, effective November 1, 2021.

He has served as a member of Integrity’s

Board of Directors since December 17, 2020.

Concurrent with his appointment, Mr.

stepped down from the Board.

Effective November 20201, the Company

Goode options to purchase up to 1.5 %

of the fully diluted common stock, par value $ 0.001

per share (approximately 330 thousand options),

of the Company (“Common Stock”) as of

the Effective Date, with a per share exercise price equal to the greater of (A) $ 5.20

per share or (B) the closing price of a share

of Common Stock on the Effective Date, as reported by Bloomberg L.P., which shall vest in equal monthly installments over a three year

period following the Effective Date.

December 3, 2021, James p.

thrower was appointed as Vice President Engineering of the company.

December 20201, the Company granted Mr.

Thrower options to purchase up to 1.15 %

of the fully diluted common stock, par value $ 0.001

per share (approximately 250 thousand

options), of the Company (“Common Stock”) as of the Effective Date, with a per share exercise price equal to the

greater of (A) $ 5.20

per share or (B) the closing price of a share

of Common Stock on the Effective Date, as reported by Bloomberg L.P., which shall vest in equal monthly installments over a three

year period following the Effective Date.

OF STOCK GRANTS ACTIVITY

Grants to Employees

Weighted average exercise price (US$)

Balance outstanding of December 31,2018

Balance outstanding as of December 31,2019

Balance exercisable of December 31,2019

8 unchanged sentences

following tables summarize information about options outstanding at December 31, 2021:

OF STOCK GRANTS, BY EXERCISE PRICE RANGE

Outstanding at December 31, 2021

Exercisable at December 31, 2021

Weighted average remaining contractual life (years)

APPLICATIONS, INC.

Weighted average remaining contractual

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

STOCK, PREFERRED STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

– COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

compensation (cont.)

3 unchanged sentences

The following are the data and assumptions used:

Fair value calculations - Warrant

December 31, 2019

Dividend yield (%)

Expected volatility (%) (*)

Risk free interest rate (%)

Expected term of options (years)

Exercise price (US dollars)

Share price (US dollars) (**)

Fair value (US dollars)

to the low trading volume of the Company’s Common Stock, the expected volatility for 2019 grants was based on a sample of 248

companies operating in the Healthcare Products industry, respectively.

Common Stock price, per share for the year ended December 31, 2019 reflects the Company’s management’s estimation of

the fair value per share of Common Stock.

In reaching its estimation for December 31, 2019, management considered, among other things,

a valuation prepared by a third-party valuation firm following the issuance of the Series D Units.

NOTE 11 –

OF ASSUMPTIONS USED TO VALUE OPTIONS

value calculations - Warrant

volatility (%)

free interest rate (%)

term of options (years)

price (US dollars)

value (US dollars)

10 – RESEARCH AND DEVELOPMENT EXPENSES

OF RESEARCH AND DEVELOPMENT EXPENSES

In thousand of US dollars

Research and Development

December 31, 2021

2 unchanged sentences

Professional fees

Regulations related

Expenses due to slow inventory write-off

Vehicle maintenance

APPLICATIONS, INC.

Total research and development

expenses, net

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

AND MARKETING EXPENSES

11 – MARKETING EXPENSES

OF SELLING AND MARKETING EXPENSES

Selling and Marketing

December 31, 2020

December 31, 2019

Salaries and related expenses

Professional fees

Travel & expenses

Exhibitions and Shows

AND ADMINISTRATIVE EXPENSES

Total selling and marketing

12 – GENERAL AND ADMINISTRATIVE EXPENSES

OF GENERAL AND ADMINISTRATIVE EXPENSES

In thousand of US dollars

4 unchanged sentences

Professional fees

Travel & expenses

Bad debt expense

Vehicle maintenance

APPLICATIONS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

of results for tax purposes under the Israeli Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment

Total general and

administrative expenses

13 – INCOME TAX

of results for tax purposes under the Israeli Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment

January 1, 2008, the results of operations of Integrity Israel for tax purposes have been measured on a nominal basis.

2 unchanged sentences

Notwithstanding,

pursuant and subject to the provisions of article 145 of the Income Tax Ordinance, Integrity Israel’s tax returns that were

filed with the tax authority up to and including 2016 are considered final.

of December 31, 2020, the Company had cumulative net operating losses (NOL) for US federal purposes of approximately $9.3 million.

$2.5 million of the federal net operating loss can be carried forward indefinitely and $6.8 million of the federal net operating

loss can be offset against taxable income for 20 years that will expire between the years 2030-2037.

Integrity Israel has losses

carry forward balances for Israeli income tax purposes of approximately $38.9 million to offset against future taxable income for

an indefinite period of time.

following is a reconciliation between the theoretical tax on pre-tax income, at the tax rate applicable to the Company (federal tax

rate) and the tax expense reported in the financial statements:

Pretax income (loss)

Federal tax rate

Income tax expenses (benefit) computed at the ordinary tax rate

Non-deductible expenses

Stock-based compensation

Tax in respect of differences in corporate tax rates

Return to Provision

Losses and timing differences in respect of which no deferred taxes assets were recognized

APPLICATIONS, INC.

of December 31, 2021, the Company had cumulative net operating losses (NOL) for US federal purposes of approximately $ 10.5

Integrity Israel has losses carry

forward balances for Israeli income tax purposes of approximately $ 41.0

million to offset against future taxable

income for an indefinite period of time.

the years ended December 31, 2021 and 2020, the main reconciling item between the statutory tax rate of the Company and the effective

tax rate at the rate of 21.0 %

for 2021 and 2020, respectively, is the recognition of valuation allowance in respect of deferred taxes relating to accumulated net operating

losses carried forward and other permanent and temporary differences due to the uncertainty of the realization of such deferred taxes

and withholding taxes that were deducted by the Company’s customers.

INTEGRITY APPLICATIONS, INC.)

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

13 – INCOME TAX (cont.)

taxes result principally from temporary differences in the recognition of certain revenue and expense items for financial and income

tax reporting purposes.

Significant components of the Group’s future tax assets are as follows:

OF DEFERRED TAXES

Composition of deferred tax assets:

2 unchanged sentences

Valuation allowance

loss and the weighted average number of shares used in computing basic and diluted loss per share for the years ended December 31, 2020

and 2019 are as follows:

Income (loss) for the period attributable to common stockholders

Common shares used in computing Basic loss per share

Common shares used in computing Diluted loss per share (*)

Total weighted average number of Common shares related to outstanding convertible Preferred Stock, options and warrants excluded from the calculations of diluted loss per share (**)

applying the treasury method, the average market price of Common Stock was based on management estimate For December 31, 2020.

considered, among other things, the price per share in February 2020 offering ($0.4)

that will be issued upon exercise of all stock options and warrants, have been excluded from the calculation of the diluted net loss

per share for all the reported periods for which net loss was reported because the effect of the common shares issuable as a result

of the exercise or conversion of these instruments was anti-dilutive.

APPLICATIONS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

Company operates in one operating segment with negligible income in 2020.

Total deferred

14 – SEGMENT INFORMATION

Company operates in one

operating segment with no income in 2021.

long-lived assets are owned by Integrity Israel and are located in Israel.

15 – RELATED PARTIES

Garrett, Inc., which is controlled by one of our directors, Andrew Sycoff, received during the year ended December 31, 2020, cash

approximately $2 million in placement agent fees and 3,750,000 warrants for Placement Agent fees in 2020 from us.

the year ending December 31, 2020 and 2019, $756 and $249 thousand, respectively, representing the fair value of warrants issued

as consideration for placement agent services to AGI.

approximately $ 2

million in placement agent fees and 3,750,000

warrants for Placement Agent fees in 2020

the year ended December 31, 2020, $ 756

thousand, representing the fair value of

warrants issued as consideration for placement agent services to AGI.

This amount was accounted for as Warrants with down-round protection.

issuance, the fair value was recognized as an increase in additional paid in capital

APPLICATIONS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

February 8, 2021, the Company announced that it has promoted Erez Ben-Zvi to General Manager in addition to his current role as Vice

President of Product, effective immediately, with a one-time bonus of $18,000 and an increase in annual compensation of $36,000.

Ben-Zvi will assume the day-to-day responsibilities of David Malka who will be stepping down as President effective April 6, 2021.

Upon issuance, the fair value was recognized as an increase in additional paid in capital

The Company has evaluated all subsequent events through the date when these

financial statements were issued to determine if these must be reported.

The Company determined that there were no reportable subsequent

events to disclose in these financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures