Glucotrack, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our 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, 2022, 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. Management’s Report on Internal Control Over Financial Reporting Our 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, 2022 and concluded that internal control over financial reporting as at December 31, 2022 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, 2022, 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. Management 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 2023; however, the implementation of these initiatives may not fully address any material weaknesses that we may have in our internal control over financial reporting. Changes in Internal Control over Financial Reporting During the year ended December 31, 2022, 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. Attestation Report of the Registered Public Accounting Firm 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. Item 9B. Other Information. None. Item 9 C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspection None. PART III Item 10. 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 2022 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. 37 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. 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; insider trading; reporting Code violations; and maintaining accountability for adherence to the Code. 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. Item 11. Executive Compensation. The information required for this Item is incorporated by reference from our Proxy Statement. Item 12. 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. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required for this Item is incorporated by reference from our Proxy Statement. Item 14. Principal Accountant Fees and Services. The information required for this Item is incorporated by reference from our Proxy Statement. PART IV Item 15. Exhibits, Financial Statement Schedules. (a) Document List (1) Financial Statements: The financial statements of the Company filed herewith are set forth in Part II, Item 8 of this report. (2) Financial Statement Schedules: None. (3) Exhibits: Exhibit Number Description 2.1 Merger Agreement and Plan of Reorganization, dated as of May 25, 2010, by and among Integrity Applications, Inc., Integrity Acquisition Ltd. and A.D. Integrity Applications Ltd. (1) 3.1 Certificate of Incorporation of Integrity Applications, Inc. (1) 38 3.2 Certificate of Amendment to Certificate of Incorporation of Integrity Applications, Inc. (1) 3.3 Bylaws of Integrity Applications, Inc. (1) 3.4 Certificate of Designation of Preferences and Rights of Series A 5% Convertible Preferred Stock (2) 3.5 Certificate of Designation of Preferences and Rights of Series B 5.5% Convertible Preferred Stock (3) 3.6 Certificate of Designation of Preferences and Rights of Series C 5.5% Convertible Preferred Stock (8) 3.7 Amendments to The Company’s Certificate of Incorporation ** 4.1 Specimen Certificate Evidencing Shares of Common Stock (1) 4.2 Form of Common Stock Purchase Warrant (1) 4.3 Form of Series A Securities Purchase Agreement (2) 4.4 Form of Series A Common Stock Purchase Warrant (2) 4.5 Form of Series A Registration Rights Agreement (2) 4.6 Form of Series B Securities Purchase Agreement (3) 4.7 Form of Series B-1 Common Stock Purchase Warrant (3) 4.8 Form of Series B-2 Common Stock Purchase Warrant (3) 4.9 Form of Series B Registration Rights Agreement (3) 4.10 Form of Series C Securities Purchase Agreement (8) 4.11 Form of Series C-1 Common Stock Purchase Warrant (8) 4.12 Form of Series C-2 Common Stock Purchase Warrant (8) 4.13 Form of Series C Registration Rights Agreement (8) 4.14 Form of Series D Securities Purchase Agreement (12) 4.15 Form of Series D-1 Common Stock Purchase Warrant (12) 4.16 Form of Series D-2 Common Stock Purchase Warrant (12) 4.17 Form of Series D-3 Common Stock Purchase Warrant (12) 4.18 Form of Series D Registration Rights Agreement (12) 10.1* Integrity Applications, Inc. 2010 Incentive Compensation Plan (1) 10.2* Amendment No. 1 to Integrity Applications, Inc. 2010 Incentive Compensation Plan (13) 10.3* Amendment No. 2 to Integrity Applications, Inc. 2010 Incentive Compensation Plan (11) 10.4* Form of Director and Officer Indemnification Agreement (1) 10.5* Personal Employment Agreement, dated as of October 19, 2010, between A.D. Integrity Applications Ltd. and Avner Gal (1) 10.6* Letter Agreement, effective as of April 7, 2017, among Integrity Applications, Inc., A.D. Integrity Applications Ltd., and Avner Gal (11) 10.7* Amended and Restated Personal Employment Agreement, effective as of April 7, 2017, between A.D. Integrity Applications Ltd. and David Malka (11) 10.8 Irrevocable Undertaking of Indemnification, dated as of July 26, 2010, by and among Integrity Applications, Inc., Avner Gal, Zvi Cohen, Ilana Freger, David Malka and Alexander Raykhman (1) 10.9 Investment Agreement, dated February 18, 2003, between A.D. Integrity Applications Ltd., Avner Gal, Zvi Cohen, David Freger and David Malka and Yigal Dimri (1) 10.10* Form of Stock Option Agreement (1) 10.11* Form of Stock Option Agreement (ESOP) (1) 10.12 Letter of Approval, addressed to Integrity Applications Ltd. from the Ministry of Industry, Trade and Employment of the State of Israel (6) 10.13 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. (4) 10.14 Investment Agreement, dated March 16, 2004, by and among A.D. Integrity Applications Ltd., Yitzhak Fisher, Asher Kugler and Nir Tarlovsky. (4) 10.15* Personal Employment Agreement, dated as of October 22, 2013, between A.D. Integrity Applications Ltd. and Eran Hertz. (7) 39 10.16 Personal Employment Agreement, dated as of February 1, 2017, between A.D. Integrity Applications Ltd. and Sami Sassoun (9) 10.17 Amended and Restated Consulting Agreement, dated as of February 6, 2017, between Integrity Applications, Inc. and Strand Strategy (9) 10.18 Personal Employment Agreement, dated as of March 20, 2017, between Integrity Applications, Inc. and John Graham (9) 10.19* First Amendment to Employment Agreement, effective as of April 7, 2017, between Integrity Applications, Inc. and John Graham (11) 10.20* Employment Agreement, effective as of June 26, 2017, between Integrity Applications, Inc. and David Podwalski (5) 14.1 Code of Ethics (9) 21.1 Subsidiaries of Integrity Applications, Inc. (10) 23.1 Consent of Marcum LLP 31.1 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 *** 31.2 Certification of Principal Financial 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 *** 32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 *** 32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 *** 101.INS Inline XBRL Instance Document ** 101.SCH Inline XBRL Schema Document ** 101.CAL Inline XBRL Calculation Linkbase Document ** 101.DEF Inline XBRL Taxonomy Extension Calculation Linkbase ** 101.LAB Inline XBRL Label Linkbase Document ** 101.PRE Inline PRE XBRL Presentation Linkbase Document ** 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) (1) Previously filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on August 22, 2011. (2) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013. (3) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on September 5, 2014. (4) Previously 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. (5) Previously 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. (6) Previously 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. (7) Previously 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. (8) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 15, 2016. (9) Previously 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. (10) Previously filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on November 7, 2017. (11) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 15, 2017 (12) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 7, 2018. (13) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 23, 2016. * Compensation Plan or Arrangement or Management Contract. ** Previously filed. *** Filed herewith. 40 SIGNATURES Pursuant 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 March 31, 2023. GLUCOTRACK, INC. By: /s/ Paul Goode Name: Paul Goode Title: Chief Executive Officer (Principal Executive Officer) By: /s/ Jolie Kahn Name: Jolie Kahn Title: Chief Financial Officer (Principal Financial Officer) Pursuant 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. Signature Title Date /s/ Jolie Kahn Chief Financial Officer March 31, 2023 Jolie Kahn (Principal Executive and Financial Officer and Principal Accounting Officer) /s/ Robert Fischell Director March 31, 2023 Dr. Robert Fischell /s/ Shimon Rapps Director March 31, 2023 Shimon Rapps /s/ Paul V.Goode CEO March 31, 2023 Paul V.Goode /s/ Luis Malave Director March 31, 2023 Luis Malave 41 GLUCOTRACK INC. Consolidated Financial Statements as of December 31, 2022 Table of Contents Page Report of Independent Registered Public Accounting Firm – PCAOB ID NUMBER 1375 F-2 Consolidated Financial Statements Balance Sheets F-3 Statements of Operations and Comprehensive Loss F-4 Statements of Changes in Stockholders’ Equity (Deficit) F-5 Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 – F-26 F- 1 Fahn Kanne & Co. Head Office 32 Hamasger Street Tel-Aviv 6721118, ISRAEL PO Box 36172, 6136101 T +972 3 7106666 F +972 3 7106660 www.gtfk.co.il Report of Independent Registered Public Accounting Firm Board of Directors and the Stockholders of GLUCOTRACK INC. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of GlucoTrack Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1B to the financial statements, the Company has incurred net losses and negative cash flows from its operations and comprehensive loss since its inception and as of December 31, 2022, there is an accumulated deficit of $101,901. These conditions, along with other matters as set forth in Note 1B, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 1B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for opinion These 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. We 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 or fraud. The Company 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. Our 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. Critical accounting matters Critical 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. /s/ FAHN KANNE & CO. GRANT THORNTON ISRAEL Certified Public Accountants (Isr.) We have served as the Company’s auditor since 2010. Tel-Aviv, Israel March 31, 2023 F- 2 GLUCOTRACK INC. CONSOLIDATED BALANCE SHEETS December 31, 2022 December 31, 2021 In thousand of US dollars (except stock data) December 31, 2022 December 31, 2021 Current Assets Cash and cash equivalents (Note 2H) 2,312 6,062 Other current assets 67 43 Total current assets 2,379 6,105 Operating lease right-of-use assets, net - 40 Property and equipment, net (Note 3) 40 69 Restricted cash (Note 2H) 19 51 TOTAL ASSETS 2,438 6,265 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable 672 631 Operating lease liabilities, current - 23 Other current liabilities (Note 4) 341 229 Total current liabilities 1,013 883 Non-current Liabilities Loans from stockholders (Note 5) 195 210 Operating lease liabilities, non-current - 17 Total non-current liabilities 195 227 Total liabilities 1,208 1,110 Commitments and contingent liabilities (Note 6) - - Stockholders’ Equity Common Stock of $ 0.001 par value (“Common Stock”): 500,000,000 shares authorized; 15,500,730 and 15,470,402 shares issued and outstanding as of December 31, 2022 and 2021, respectively 15 15 Common Stock of $ 0.001 par value (“Common Stock”): 500,000,000 shares authorized; 15,500,730 and 15,470,402 shares issued and outstanding as of December 31, 2022 and 2021, respectively 15 15 Additional paid-in capital 103,095 102,612 Receipts on account of shares 4 - Accumulated other comprehensive income (loss) 17 ( 6 ) Accumulated deficit ( 101,901 ) ( 97,466 ) Total stockholders’ equity 1,230 5,155 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 2,438 6,265 The accompanying notes are an integral part of these consolidated financial statements F- 3 GLUCOTRACK INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2022 2021 In thousand of US dollars (except stock and per stock amounts) 2022 2021 Research and development expenses (Note 8) 1,967 1,810 Marketing expenses (Note 9) - 139 General and administrative expenses (Note 10) 2,465 2,091 Total operating expenses 4,432 4,040 Operating loss 4,432 4,040 Other expense 14 53 Financing income, net ( 11 ) ( 26 ) Loss for the year 4,435 4,067 Other comprehensive loss (income): Foreign currency translation adjustment ( 23 ) 21 Comprehensive loss for the year 4,412 4,088 Loss per share (Basic and Diluted) 0.29 0.26 Weighted average number of common stock outstanding used in computing basic and diluted net loss per share 15,474,660 15,450,824 The accompanying notes are an integral part of the consolidated financial statements. F- 4 GLUCOTRACK INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Numbers of Shares Amount Paid-in Capital account of shares Comprehensive Loss Accumulated Deficit Stockholders’ Equity In thousands of US Dollars (except share data) Common Stock Additional Receipts on Accumulated Other Total Numbers of Shares Amount Paid-in Capital account of shares Comprehensive Loss Accumulated Deficit Stockholders’ Equity Balance as of January 1, 2021 15,462,812 15 102,351 - 15 ( 93,399 ) 8,982 Loss for the year - - - - - ( 4,067 ) ( 4,067 ) Other comprehensive loss - - - - ( 21 ) - ( 21 ) Issuance of restricted shares as compensation towards directors 7,588 (*)- 38 - - - 38 Stock-based compensation - - 223 - - - 223 Balance as of December 31, 2021 15,470,402 15 102,612 - ( 6 ) ( 97,466 ) 5,155 Balance as of January 1, 2022 15,470,402 15 102,612 - ( 6 ) ( 97,466 ) 5,155 Loss for the year - - - - - ( 4,435 ) ( 4,435 ) Other comprehensive income - - - - 23 - 23 Stock-based compensation 13,105 (*)- 439 - - - 439 Issuance of restricted shares as compensation towards directors 17,223 (*)- 44 4 - - 48 Balance as of December 31, 2022 15,500,730 15 103,095 4 17 ( 101,901 ) 1,230 (*) Less than 1 thousand. The accompanying notes are an integral part of the consolidated financial statements. F- 5 GLUCOTRACK INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 2022 2021 Cash flows from operating activities: Loss for the year ( 4,435 ) ( 4,067 ) Adjustments to reconcile loss for the year to net cash used in operating activities: Depreciation 23 42 Capital loss from sale of property and equipment 1 42 Stock-based compensation 439 223 Issuance of restricted shares as compensation to directors 48 38 Linkage difference on principal of loans from stockholders 11 6 Changes in assets and liabilities: Decrease in accounts receivable - 68 Decrease in inventory - 293 Decrease (increase) in other current assets ( 28 ) 15 Increase (Decrease) in accounts payable 74 ( 257 ) Increase (Decrease) in other current liabilities 138 ( 172 ) Net cash used in operating activities ( 3,729 ) ( 3,769 ) Cash flows from investment activities: Proceeds from sale of property and equipment 2 4 Purchase of property and equipment ( 1 ) ( 5 ) Net cash provided by (used in) investment activities 1 ( 1 ) Effect of exchange rate changes on cash and cash equivalents ( 54 ) ( 2 ) Change in cash, cash equivalents, and restricted cash ( 3,782 ) ( 3,772 ) Cash, cash equivalents, and restricted cash at beginning of the year 6,113 9,885 Cash, cash equivalents, and restricted cash at end of the year 2,331 6,113 The accompanying notes are an integral part of the consolidated financial statements. F- 6 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – GENERAL A. GlucoTrack Inc. (the “Company”) was incorporated on May 18, 2010 under the laws of the State of Delaware. The Company is a medical device company, focuses on the design, development and commercialization of non-invasive glucose monitoring devices for use by people with diabetes. To date, the Company developed indirectly through its wholly owned subsidiary, A.D. Integrity Applications Ltd. (the “Integrity Israel”), a non-invasive glucose monitor, the GlucoTrack® glucose monitoring device, which is designed to help people with diabetes and pre-diabetics obtain glucose level readings without the pain, inconvenience, cost and difficulty of conventional (invasive) spot finger stick devices. The first generation (“GlucoTrack 1.0”) utilizes a combination of ultrasound, electromagnetic and thermal technologies to obtain glucose measurements in less than one minute via a small sensor that is clipped onto one’s earlobe and connected to a small, handheld control and display unit, all without drawing blood or interstitial fluid. Currently, the Company is developing directly its new generation (“GlucoTrack 2.0”) which utilizes substantially identical underlying sensor technology and which is expected to be based on a completely wireless sensor to be clipped on the earlobe. GlucoTrack 2.0 is designed to eliminate the handheld unit and is expected to transmit results directly to a user’s smartphone. The Company and Integrity Israel are considered collectively as the “Group” In connection with its application to list its shares on Nasdaq Capital Market (“NASDAQ”), as detailed below, 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 the then 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. On December 8, 2021, the Company announced that its 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, the Company announced that it has completed its corporate name and ticker symbol change on the Nasdaq Capital Market from IGAP to GCTK, effective at the commencement of trading on March 14, 2022. On October 07, 2022, the Company entered into an agreement with its Chief Executive Officer under which intellectual property was purchased to be used for newly acquired continuous glucose monitoring (CGM) technology which is a multi-year implantable CGM targeting Type 1 patients and Type 2 patients on insulin therapy. The technology is in a feasibility assessment phase using bech testing and simulated data. Upon success, the project will migrate into development of a prototype implantable system for evaluation in animal studies. The goal of the implantable CGM technology is to provide a minimum of two years of CGM data without requiring the patient to have a wearable device, unlike current technology available in the market ( see also note 6C). On November 22, 2022, Nasdaq provided notice that pursuant to Nasdaq Listing Rule 5550(b)(1), the Company is required to maintain a minimum of $ 2,500 in stockholders’ equity. In addition, the Company does not meet the alternatives of market value of listed securities or net income from continuing operations. Thus, the Company no longer complies with the Rule for continued listing. The Company has a 45-day period ending on January 6, 2023 to submit a plan of compliance to Nasdaq, and the Company’s plan was accepted, and the Company must regain compliance by May 22, 2023. F- 7 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 1 – GENERAL (cont.) B. Going concern uncertainty To date, the Company has not yet generated significant revenues from selling of GlucoTrack 1.0 product. In addition, development and commercialization of GlucoTrack 2.0 product is expected to require substantial expenditures and therefore the Company is dependent upon external sources for financing its operations. As of December 31, 2022, the Company has incurred accumulated deficit of $ 101,901 thousand, and negative operating cash flows. Further, the Company has generated negative operating cash flow for all reported periods. As of December 31, 2022, the balance of cash and cash equivalents amounted to $ 2,312 is insufficient for the Company to realize its business plans for the twelve-month period subsequent to the reporting period. Management has considered the significance of such condition in relation to the Company’s ability to meet its current obligations and to achieve its business targets and determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to finance its operations through the sale of equity and/or debt securities (including shelf registration statement on Form S-3 that was declared effective on September 27, 2021 by the Securities and Exchange Commission (SEC) and which allows the Company to register up to $ 100,000 thousand of certain equity and/or debt securities of the Company through prospectus supplement). There can be no assurance that the Company will succeed in obtaining the necessary financing or generating sufficient revenues from sales of its GlucoTrack 2.0 product in order to continue its operations as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. C. Effect of the spread of the Coronavirus on the Company During the year ended December 31, 2022, there were no material adverse impacts on the consolidated financial statements. The duration, scope and effects of the ongoing COVID-19 pandemic, government and other third-party responses to it, the related macroeconomic effects, and the extent of its impact on the Company’s operational and financial performance will depend on future developments. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change in future periods. F- 8 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). A. Use of estimates in the preparation of financial statements The preparation of the consolidated financial statements in conformity with US 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 financial statements, and the reported amounts of expenses during the reported periods. Actual results could differ from those estimates. As applicable to these financial statements, the most significant estimates and assumptions relate to evaluation of going concern. B. Functional currency The 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 are stated on the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses 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. Accordingly, assets and liabilities were translated from NIS to US dollars 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’ equity, under “accumulated other comprehensive income (loss)”. SCHEDULE OF OFFICIAL EXCHANGE RATE 2022 2021 Official exchange rate of NIS 1 to US dollar 0.284 0.321 Increase (decrease) of the official exchange rate of NIS 1 to US dollar during the year: ( 11.62 )% 3.22 % C. Principles of consolidation The consolidated financial statements include the accounts of the Company and its subsidiary. All intercompany balances and transactions have been eliminated in consolidation. D. Cash and cash equivalents The Group considers all short-term investments, which are highly liquid investments with original maturities of three months or less at the date of purchase, to be cash equivalents. F- 9 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) E. Business Combinations and Assets Acquisitions When the Company acquires net assets that do not constitute a business, as defined under ASU 2017-01 Business Combinations (Topic 805) Clarifying the Definition of a Business (such when there is no substantive process in the acquired entity), no goodwill is recognized and acquired In-Process Research and Development intangible asset (“IPR&D”) to be used in research and development projects which have been determined not to have alternative future use, is expensed immediately. Contingent consideration related to asset acquisition that will be paid subject to the achievement of performance milestones, which are outside the control of the Company, is recognized when the contingency is resolved or when it is considered as probable and reasonably estimable under ASC 450, Contingencies. During the reported periods, the Company was not involved in any Business Combinations transaction (see also Note 6D). F. Property and equipment, net 1. Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. When an asset is retired or otherwise disposed of, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition is reflected in the statements of operations. 2. Rates of depreciation: SCHEDULE OF PROPERTY AND EQUIPMENT, RATES OF DEPRECIATION % Computers 33 Furniture and office equipment 7 - 15 G. Impairment of long-lived assets The 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. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. To date the Group did not incur any material impairment losses related to long lived assets. F- 10 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) H. Cash and Cash Equivalents and Restricted cash Restricted 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 6C). For presentation of statement of cash flows purposes, restrict cash balances are included with cash and cash equivalents, when reconciling the reported period total amounts. SCHEDULE OF RESTRICT CASH BALANCES ARE INCLUDED WITH CASH AND CASH EQUIVALENTS 2022 2021 In thousand of US dollars December 31 December 31 2022 2021 Cash and cash equivalents $ 2,312 $ 6,062 Restricted cash $ 19 $ 51 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 2,331 $ 6,113 I. Income tax The Group accounts for income taxes in accordance with ASC 740, “Income Taxes”. Accordingly, deferred income taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the enacted tax rates expected to be in effect when these differences reverse. Valuation allowances in respect of deferred tax assets are provided for, if necessary, to reduce deferred tax assets to amounts more likely than not to be realized. The 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 such items in its fiscal 2022 and 2021 financial statements and did not recognize any liability with respect to unrecognized tax position in its balance sheet. F- 11 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) J. Liability for employee rights upon retirement Integrity Israel’s liability for employee rights upon retirement with respect to its Israeli employees was 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 were entitled to one month’s salary for each year of employment, or ratable portion thereof for periods less than one year. Integrity Israel made monthly deposits to insurance policies and severance pay funds. The deposited funds were withdrawn upon the fulfillment of Integrity Israel’s severance obligations pursuant to Israeli severance pay laws or labor agreements with its employees. The value of the deposited funds was based on the cash surrender value of these policies, and includes immaterial profits or losses. Commencing 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. Related obligations and liabilities under Section 14 are not recorded as an asset or as a liability in the Company’s balance sheet. For the year ended December 31, 2022, and 2021, severance expenses have been recorded in total amount of $ 27 and $ 43 thousand, respectively. K. Research and development expenses Research and development expenses are charged to operations as incurred. L. Royalty-bearing grants Royalty-bearing 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. To date, the cumulative research and development grants received by Integrity Israel from IIA amounted to $ 93 thousand. F- 12 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) M. 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. In 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”, 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 6,614,654 and 6,404,238 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, 2022 and 2021, respectively, because the effect of the common shares issuable as a result of the exercise of such instruments was determined to be anti-dilutive. N. Stock-based compensation The 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 are recognized in the consolidated statement of operations and comprehensive loss as an operating expense based on the fair value of the award at the date of grant. The fair value of stock options granted is estimated using the Black-Scholes option-pricing model. The Group has expensed compensation costs, net of estimated forfeitures, applying the accelerated vesting method, over the requisite service period or over the implicit service period when a performance condition affects the vesting, and it is considered probable that the performance condition will be achieved. 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. F- 13 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) O. Fair value of financial instruments ASC Topic 825-10, “Financial Instruments” defines financial instruments and requires disclosure of the fair value of financial instruments held by the Group. The Group considers the carrying amount of cash and cash equivalents, restricted cash, accounts receivable, other current assets, accounts payable and other current liabilities balances, to approximate their fair values due to the short-term maturities of such financial instruments. ASC Topic 825-10, establishes the following fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3 - Unobservable inputs are used when little or no market data is available. Level 3 inputs are considered as the lowest priority under the fair value hierarchy. The fair value of the financial instruments included in the working capital of the Group (cash and cash equivalents, accounts payable and other current assets and liabilities) approximates their carrying value. The Group did not estimate the fair value of the loans received from stockholders since their repayment schedule has not yet been determined. P. Concentrations of credit risk Financial 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 United States. 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. Q. Contingencies The Group records accruals for loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Legal costs incurred in connection with loss contingencies are expensed as incurred. R. Warrants with Down-Round Protection Following 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. In 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) calculation. S. Modification of equity-classified contracts The modification or exchange of equity-classified contracts, such as warrants that were classified as equity before the modification or exchange and remained eligible for equity classification after the modification, is accounted for in a similar manner to a modification of stock-based compensation. 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 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. F- 14 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) T. Operating Lease The Company applies ASC Update 2016-02, Leases (Topic 842) under which the Company determines if an arrangement is a lease at inception. Under Topic 842, arrangements meeting the definition of a lease are classified as operating or financing leases. A classification of a lease is determined based on the following criteria: 1. The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. 2. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. 3. The lease term is for the major part of the remaining economic life of the underlying asset ( Generally, 75% or more of the remaining economic life of the underlying assets ). 4. The 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 ). 5. The 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 term. If any of the above criteria are met, the lease is classified as a finance lease. Otherwise, the lease is classified as an operating lease. Leases 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 incurred. The 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. In 2022, the Company terminated its lease agreement for vehicles, as the senior employees in Israel has resigned from the Company, and respectively have returned the vehicles to the lease dealership. As of December 31, 2022, the Company is subject to several non-cancelable lease agreements for workspaces for use in its operations, which are classified as operating leases. F- 15 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 3 – PROPERTY AND EQUIPMENT, NET SCHEDULE OF PROPERTY AND EQUIPMENT, NET Property and Equipment In thousand of US dollars December 31, 2022 December 31, 2021 Computers 224 306 Furniture and office equipment 70 183 Property and equipment, gross 294 489 Less – accumulated depreciation ( 254 ) ( 420 ) Property and equipment, net 40 69 During the years ended December 31, 2022 and 2021, depreciation expenses have been recorded in total amount of $ 23 and $ 42 thousand, respectively. NOTE 4 – OTHER CURRENT LIABILITIES SCHEDULE OF OTHER CURRENT LIABILITIES Other Current Liabilities In thousand of US dollars December 31, 2022 December 31, 2021 Employees and related institutions 16 98 Accrued expenses and others 325 131 Total other current liabilities 341 229 NOTE 5 – LOANS FROM STOCKHOLDERS During 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 certain lender in 2015, the remaining balance as of December 31,2022 is approximately $ 195 thousand. The loans are indexed to the Israeli consumer price index from their origination date and bear no interest. The Group will be required to pay the loans, in quarterly installments, commencing on the first quarter following the first fiscal year in which the Group reports net profit in its annual report. 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. As of December 31, 2022, the Group does not expect to make any 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 non-current liability. F- 16 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 6 – COMMITMENTS AND CONTINGENT LIABILITIES A. On 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. As of December 31, 2022, the remaining contingent liability with respect to royalty payment on future sales equals approximately $ 80 thousand. Such contingent obligation has no expiration date. As of December 31, 2022, the Group accrued royalties to the IIA in insignificant amounts. B. Since March 2021 Integrity Israel is renting several workspaces at office building in the city Or – Yehoda. According to the lease agreement, Integrity Israel renting those flexible shared workspaces for period shorter than one year. C. On October 7, 2022 (“the Closing Date”), the Company entered into Intellectual Property Purchase Agreement (the “Agreement”) with Paul Goode, which is the Company’s Chief Executive Officer (the “Seller”), under which it was agreed that on and subject to the terms and conditions of the Agreement, at the Closing Date, Seller shall sell, assign, transfer, convey and deliver to the Company, all of Seller’s right, title and interest in and to the following assets, properties and rights (collectively, the “Purchased Assets”): (a) All rights, title, interests in all current and future intellectual property, including, but not limited to patents, trademarks, trade secrets, industry know-how and other IP rights relating to an implantable continuous glucose sensor (collectively, the “Conveyed Intellectual Property”); and (b) All of the goodwill relating to the Purchased Assets. In consideration for the sale by Seller of the Purchased Assets to the Company, at the Closing Date, the Company paid to Seller cash in the amount of one dollar and up to 1,000,000 shares of its common stock to be issued based upon the performance milestones as set forth in the Agreement (the “Purchase Price”). In addition, if upon the final issuance, the aggregate 1,000,000 shares represent less than 1.5 % of the then outstanding shares of the Company, the final issuance will include such number of additional shares so that the total aggregate issuance equals 1.5 % of the outstanding shares (the “True-Up Shares”). All shares of Company common stock that will be issued under this agreement shall be (i) restricted and issued in transactions exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended and (ii) subject to the lockup provisions. When the Company acquires net assets that do not constitute a business, as defined under ASU 2017-01 Business Combinations (Topic 805) Clarifying the Definition of a Business (such when there is no substantive process in the acquired entity) the transaction is accounted for as asset acquisition and no goodwill is recognized. The acquired In-Process Research and Development intangible asset (“IPR&D”) to be used in research and development projects which have been determined not to have alternative future use, is expensed immediately. At the Closing Date, it was determined that the asset acquisition represent the purchase of IPR&D with no alternative future use. However, the achievement of each of the performance milestones is considered as contingent event outside the Company’s control and thus the contingent consideration which is equal to the Purchase Price as measured at the Closing Date will be recognized when it becomes probable that each target will be achieved within the reasonable period of time. Such additional contingent consideration will be recognized in subsequent periods if and when the contingency (the achievement of targets) is resolved, or when it will be considered as reasonably estimable under ASC 450, Contingencies. For the period commencing the Closing Date and through December 31, 2022, the Company did not record any amount related to the contingent consideration, relating to any of the aforesaid performance milestones. F- 17 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 7 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION A. Description of the rights attached to the Common Stock Each 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. B. Stock-based compensation 1. Plan On January 11, 2010, the Company’s Board of Directors approved and adopted the 2010 Share Incentive Plan (the “Plan”), pursuant to which the Company’s Board of Directors may award share options to purchase the Company’s Ordinary Shares as well as restricted shares, restricted stock units (the “RSU”) and other share-based awards to designated participants. Subject to the terms and conditions of the Plan, the Company’s Board of Directors has full authority in its discretion, from time to time and at any time, to determine (i) the designate participants; (ii) the terms and provisions of the respective award agreements, including, but not limited to, the number of share options to be granted to each optionee, the number of shares to be covered by each share option, provisions concerning the time and the extent to which the share options may be exercised and the nature and duration of restrictions as to the transferability or restrictions constituting substantial risk of forfeiture and to cancel or suspend awards, as necessary; (iii) determine the fair market value of the shares covered by each award; (iv) make an election as to the type of approved 102 Option under Israeli tax law; (v) designate the type of share options; (vi) take any measures, and to take actions, as deemed necessary or advisable for the administration and implementation of the Plan; (vii) interpret the provisions of the Plan and to amend from time to time the terms of the Plan . 2. Grant of equity awards to employees A. On February 8, 2021, The Company granted Mr. Erez Ben-Zvi, the then Vice President of Product of the Company, annual award with fair value of NIS 210 thousand (approximately $ 65 thousand) of 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”). 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). 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, mutatis mutandis, such that the vesting period of each of the respective Additional RSU shall commence from its actual date of grant. In June 2022, Erez Ben-Zvi resigned from the Company. Thus, his stock-based compensation was terminated in the last vesting date of April 2022. During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation expenses (income) of $( 25 ) thousand and $ 76 thousand, respectively, with respect to the above grant. F- 18 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 7 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.) B. Stock-based compensation (cont.) 2. Grant of equity awards to employees (cont.) B. In November 2020, the Company granted Mr. Shalom Shushan, the then Chief Technology Officer of the Company, annual award with fair value of NIS 90 thousand (approximately $ 28 thousand) of 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 fair value of NIS 60 thousand of Additional RSU (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). 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. In May 2022, Shalom Shushan resigned from the Company. Thus, his stock-based compensation was terminated in the last vesting date of May 2022. During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation expenses (income) of $( 6 ) thousand and $ 22 thousand, respectively, with respect to the above grant. C. In November 2021, the Company granted Mr. Paul V. Goode, the President and Chief Executive Officer of the Company, options with the fair value of $ 484 thousand, to purchase up to 1.5 % of the fully diluted common stock, par value $ 0.001 per share of the Company (approximately 328 thousand options), as of the grant 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 grant date, as reported by Bloomberg L.P., which shall vest in equal monthly installments over a three year period following the grant date. In May 2022, the Company grated Mr. Paul V. Goode, a one-time grant of restricted stock of 18,000 shares (“RSU”), which be vest during one year, as long as he is employed by the Company. During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation expenses of $ 306 thousand and $ 98 thousand, respectively, with respect to the above grant. D. In December 2021, the Company granted Mr. James p. Thrower, the Vice President Engineering of the Company, options with the fair value of $ 152 thousand, to purchase up to 1.15 % of the fully diluted common stock, par value $ 0.001 per share of the Company (approximately 262 thousand options), as of the grant 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 grant date, as reported by Bloomberg L.P., which shall vest in equal monthly installments over a three year period following the grant date. During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation expenses of $ 93 thousand and $ 16 thousand, respectively, with respect to the above grant. E. In October 2022, the Company granted Mr. Mark Tapsak, the Vice President, Sensor Science of the Company, options with the fair value of $ 22 thousand, to purchase up to 0.75 % of the fully diluted common stock, par value $ 0.001 per share of the Company (approximately 116 thousand options), as of the grant 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 grant date, as reported by Bloomberg L.P., which shall vest in equal monthly installments over a three year period following the grant date. During the year ended December 31, 2022, the Company recorded stock-based compensation expenses of $ 5 thousand with respect to the above grant. F- 19 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 7 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.) F . The following table presents the Company’s share option activity for employees and members of the Board of Directors of the Company under the Plan, for the years ended December 31, 2022 and 2021: SCHEDULE OF SHARE OPTION ACTIVITY FOR EMPLOYEES AND MEMBERS Number of Share Options Weighted Average Exercise Price Weighted average remaining contractual life Intrinsic value $ (years) $ Outstanding as of December 31, 2020 128,297 64.46 5.42 - Granted 589,933 5.2 2.88 - Forfeited or expired ( 98,177 ) 64.64 - - Outstanding as of December 31, 2021 620,053 8.05 2.99 - Exercisable as of December 31, 2021 39,223 50.27 4.65 - Number of Share Options Weighted Average Exercise Price Weighted average remaining contractual life Intrinsic value $ (years) $ Outstanding as of December 31, 2021 620,053 8.05 2.99 - Granted 115,857 5.2 2.68 - Forfeited or expired - - - - Outstanding as of December 31, 2022 735,910 7.6 2.1 - Exercisable as of December 31, 2022 245,535 12.4 2.58 - The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the deemed fair value of the Company’s Ordinary Shares on the last day of each of the applicable reported period and the exercise price, multiplied by the number of in-the-money share options) that would have been received by the share option holders had all share options holders exercised their share options on December 31 of each of the reported period. This amount is impacted by the changes in the fair market value of the Company’s Ordinary Share. F- 20 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 7 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.) G . The outstanding and exercisable share options as of December 31, 2022 have been separated into ranges of exercise prices, as follows: SCHEDULE OF OUTSTANDING AND EXERCISABLE SHARE OPTIONS Exercise price - $ Share options outstanding as of December 31, 2022 Weighted average remaining contractual term Share options exercisable as of December 31, 2022 Weighted average remaining contractual term (years) (years) 100.75 3,846 4.26 3,846 4.26 58.5 26,274 4.18 26,274 4.18 5.2 705,790 2.01 215,415 1.91 735,910 245,535 H . During the years ended December 31, 2022 and 2021, share options have not been exercised into Ordinary Shares. I . The following table presents the assumptions used to estimate the fair values of the share options granted in the reported periods presented: SCHEDULE OF ASSUMPTIONS USED TO VALUE OPTIONS 2022 2021 Year ended December 31 2022 2021 Volatility (%) 72.15 % 49.21 % Risk-free interest rate (%) 2.5 % 2.5 % Dividend yield (%) - - Expected life (years) 3 3 Exercise price ($) 5.2 5.2 Share price ($) 1.89 3.1 - 4.65 J . As of December 31, 2022, there was $ 186 thousand of unrecognized compensation expense related to unvested share options. The Company recognizes compensation expense on a straight-line basis over the requisite service periods, which results in a weighted average period of approximately 0.72 years over which the unrecognized compensation expense is expected to be recognized. F- 21 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 7 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.) 3. Grant of equity awards to non-employees A. In connection with the 2017 Offering, the Company has issued to Andrew Garrett Inc, who served as a placement agent in fundraising transaction (a) 5 -year warrants to purchase up to 1,062,717 shares of Common Stock at an exercise price of $ 3.354 per share, (b) 5 -year warrants to purchase up to 108,305 shares of Common Stock at an exercise price of $ 23.40 per share, (c) 5 -year warrants to purchase up to 8,331 shares of Common Stock at an exercise price of $ 46.80 per share and (d) 5 -year warrants to purchase up to 8,331 shares of Common Stock at an exercise price of $ 70.20 per share . In connection with February 2020 Offering, the Company has issued to the Andrew Garrett Inc, who served as a placement agent a 5 -year warrants to purchase up to 288,462 shares of Common Stock at an exercise price of $ 5.2 per share. B. In August 2020, advisory agreement was made between the Company and Malcolm McGuire & Assoc. LLC, under which the advisor is providing strategic advisory services, which include, inter alia, interface with the investment community on behalf of the Company, build a database of appropriate brokers and investors, design and implement a plan for both the short and the long-term encouragement of investor interest in the Company and create a compelling perception of the Company within the investment community. The consideration was set as a monthly fee of $ 4 thousand cash and a monthly grant of non-qualified three-year options to purchase 461 shares of the Company’s Common Stock, at an exercise price equal to $ 6.5 . During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation expenses of $ 9 thousand and $ 13 thousand, respectively, with respect to the above grant. C . On September 12, 2022, the Company signed on Advisory agreement with Andrew Garrett Inc, under which the Company agreed to extend the exercise through July 1, 2026, for all warrants issued pursuant to the Exchange Agreement dated December 31, 2018. The Company accounted for the extension of the warrants exercise period pursuant to ASC 718 as a modification. Accordingly, additional compensation of $ 56 thousand was calculated as the fair value of the modified award in excess of the fair value of the original award measured immediately before its terms have been modified based on current circumstances and recorded this incremental fair value as an immediate expense in 2022 as the warrants were fully vested at the modification date (See also note 13A). F- 22 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 7 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.) D . The outstanding and exercisable share options as of December 31, 2022 have been separated into ranges of exercise prices, as follows: SCHEDULE OF OUTSTANDING AND EXERCISABLE SHARE OPTIONS Exercise price - $ Share options outstanding and exercisable December 31, 2022 Weighted average remaining contractual term (years) 70.2 665,411 1.01 46.8 665,411 1.01 23.4 665,411 1.01 6.5 13,398 0.63 5.2 290,679 2.11 3.35 4,068,497 1.56 6,368,807 The total compensation cost related to all of the Company’s equity-based awards recognized during the years ended December 31, 2022 and 2021 was comprised as follows: SCHEDULE OF TOTAL COMPENSATION COST EQUITY BASED AWARDS Research and Development December 31, 2022 December 31, 2021 In thousand of US dollars Research and Development December 31, 2022 December 31, 2021 Research and development 92 38 General and administrative 395 223 Total compensation cost 487 261 F- 23 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 8 – RESEARCH AND DEVELOPMENT EXPENSES SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSES Research and Development December 31, 2022 December 31, 2021 In thousand of US dollars Research and Development December 31, 2022 December 31, 2021 Salaries and related expenses 749 916 Professional fees 1,124 337 Expenses due to slow inventory write-off - 321 Depreciation 20 32 Vehicle maintenance 12 42 Other 62 162 Total Research and Development Expense 1,967 1,810 NOTE 9 – MARKETING EXPENSES SCHEDULE OF MARKETING EXPENSE Selling and Marketing December 31, 2022 December 31, 2021 Salaries and related expenses - 22 Professional fees - 115 Other - 2 Total selling and marketing expense - 139 NOTE 10 – GENERAL AND ADMINISTRATIVE EXPENSES SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES In thousand of US dollars General and Administrative December 31, 2022 December 31, 2021 Salaries and related expenses 617 608 Professional fees 1,281 1,224 Bad debt expense - 59 Vehicle maintenance 8 41 Depreciation 3 10 Insurance 457 97 Other 99 52 Total general and administrative expenses 2,465 2,091 F- 24 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 11 – INCOME TAX A. Measurement of results for tax purposes under the Israeli Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment Law”) Commencing January 1, 2008, the results of operations of Integrity Israel for tax purposes have been measured on a nominal basis. B. Tax assessments For federal, state and local income tax purposes the Company remains open for examination by the tax authorities for the tax years from 2018 through 2021 under the general statute of limitations. 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 2017 are considered final. C. Loss for the year consists of the following: SCHEDULE OF INCOME TAX LOSS FOR THE YEAR 2022 2021 Year ended December 31 2022 2021 Domestic $ 3,528 $ 1,255 Foreign entity (Integrity Israel) 907 2,812 Total loss for the year 4,435 4,067 D. Net operating losses carryforward As of December 31, 2022, the Company had cumulative Net Operating Losses (NOL) carry forward for US federal purposes of approximately $ 14 million to offset against future taxable income for an indefinite period of time. Integrity Israel has cumulative NOL carry forward for Israeli income tax purposes of approximately $ 38.0 million to offset against future taxable income for an indefinite period of time. E. For the years ended December 31, 2022 and 2021, the main reconciling item 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. F- 25 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 11 – INCOME TAX (cont.) F. Deferred 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: SCHEDULE OF DEFERRED TAX ASSETS Composition of deferred tax assets: 2022 2021 As of December 31 Composition of deferred tax assets: 2022 2021 Vacation accrual - 6 Research and development credits 174 - Net operating losses carry forwards 11,805 11,654 Net deferred tax asset before deferred tax liabilities and valuation allowance 11,979 11,660 Valuation allowance ( 11,979 ) ( 11,660 ) Net deferred tax assets - - NOTE 12 – SEGMENT INFORMATION The Company operates in one operating segment which is design, development and commercialization of non-invasive glucose monitoring devices. During the reported period no revenue were recognized. All long-lived assets are owned by Integrity Israel which are located in Israel. NOTE 13 – RELATED PARTIES A. Andrew Garrett, Inc: On September 12, 2022, the Company signed on advisory agreement with Andrew Garrett Inc., which is controlled by one of member of the Company’s board of directors, Andrew Sycoff. The Company retains advisor on a non-exclusive basis to receive general business advisory services for total monthly consideration of $ 20 thousand. In addition, the Company also agreed to extend the exercise through July 1, 2026, for all warrants issued pursuant to the Exchange Agreement dated December 31, 2018. The Company accounted for the extension of the warrants’ exercise period pursuant to ASC 718 as a modification. Accordingly, additional compensation of $ 56 thousand was calculated as the fair value of the modified award in excess of the fair value of the original award measured immediately before its terms have been modified based on current circumstances and recorded this incremental fair value as an immediate expense in 2022 as the warrants were and remained fully vested at the modification date. For the year ended on December 31, 2022, the Company recognized in total expenses of $ 102 thousand due to the above agreement. B. Intellectual Property Purchase Agreement - See Note 6C C. Loans From Stockholders – See Note 5 D. Tapsak Enterprises LLC, dba Virginia Analytical On October 25, 2022, the Company entered into agreement with Tapsak Enterprises LLC dba Virginia Analytical, which fully owned by Mark Tapsak, who serves as the Vice President of Sensor Science of the Company , under which, Tapsak Enterprises LLC dba Virginia Analytical, will provide laboratory space, equipment and materials to support the Company sensor development activities for total consideration which estimates to be approximately $ 60 thousand. For the year ended on December 31, 2022, the Company recognized in total expenses of $ 38 thousand due to this agreement. NOTE 14 – SUBSEQUENT EVENTS 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. F- 26