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 Securities Exchange Act of 1924, as amended (the “Exchange Act”)) as of December 31, 2023, 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. 37 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, 2023 and concluded that internal control over financial reporting as at December 31, 2023 were not effective. As defined in Regulation 12b-2 under the 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, 2023, 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 2024; 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, 2023, 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 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 Report. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspection None. 38 PART III Item 10. Directors, Executive Officers, and Corporate Governance. The following individuals serve as Directors and Executive Officers of the Company as of the date of this Report. Directors of the Company hold office until the next annual meeting of our shareholders or until their successors have been elected and qualified. Executive officers of the Company are appointed by our board of directors and hold office until their death, resignation or removal from office. All directors serve for terms of one year each and are subject to re-election at Annual Meeting of Shareholders, unless they earlier resign. There are no material proceedings to which any of our directors, officers or affiliates, any owner of record or beneficially of more than five percent of any class of our voting securities, or any associate of any such director, officer, affiliate, or security holder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries. We have attempted and will continue to attempt to ensure that any transactions between we and our officers, directors, principal shareholders, or other affiliates have been and will be on terms no less favorable to us than could be obtained from unaffiliated third parties on an arm’s length basis. The table below sets forth (1) the names and ages of our Directors as of the date of this Proxy Statement, (2) all positions with the Company presently held by each such person and (3) the positions held by, and principal areas of responsibility of, each such person during the last five years. Name Age Position Dr. Robert Fischell 95 Director, Member of the Audit, Nominating and Governance and Compensation Committees Luis J. Malave 61 Director, Member of the Audit, Nominating and Governance and Compensation (Chair) Committees Andrew G. Sycoff 57 Director Shimon D. Rapps 44 Director, Member of the Audit Committee Allen Danzig 68 Director, Chair of the Nominating and Governance Committee and Member of the Compensation Committee Erin Carter 54 Director, Chair of the Audit Committee Allen Danzig has served on our Board since October 31, 2019 and is the Chair of our Nominating, Governance and Compensation Committee. Mr. Danzig most recently served as Vice President, Assistant General Counsel and Assistant Secretary of L3Harris Technologies, Inc., a global aerospace and defense technology contractor, with $17 billion in annual revenue. Prior to its merger with Harris Corporation in June 2019, Mr. Danzig served as Vice President, Assistant General Counsel and Assistant Secretary at L3 Technologies, Inc. where he had been employed since 2006. Prior to his employment at L3, Mr. Danzig served in management positions with Celanese Corporation, a global chemical and specialty materials company, and The Hertz Corporation, one of the world’s largest vehicle and equipment rental companies. He received his undergraduate degree from Adelphi University and law degree from Pace University School of Law and is a member of the New York State Bar. The Board has determined that Mr. Danzig is suited to serve due to his extensive legal and corporate governance experience. Dr. Robert Fischell has served as one of GlucoTrack’s directors since 2010. He also serves on GlucoTrack’s Nominating, Governance and Compensation Committee. Dr. Fischell is an inventor and serial entrepreneur with over 160 issued U.S. patents. Starting in 1959, Dr. Fischell spent over 30 years with the Johns Hopkins University Applied Physics Laboratory, which resulted in 53 patents in both aerospace and biomedical technology. His interests at Johns Hopkins then turned to the invention of new medical devices such as pacemakers and implantable heart defibrillators. Starting in 1969, Dr. Fischell began the formation of 14 private companies that licensed his patents on medical devices. These companies include Pacesetter Systems, Inc. (purchased by Siemens and now part of St. Jude Medical, Inc.), IsoStent, Inc. (merged with Cordis Company, a Johnson and Johnson Company), NeuroPace, Inc., Neuralieve, Inc., Angel Medical Systems, Inc., and Svelte Medical Systems, Inc. As it relates to diabetes management devices, he was the inventor of the first implantable insulin pump (which became Minimed, which was sold to Medtronic). Dr. Fischell’s honors include Inventor of the Year for the USA in 1984, election to the National Academy of Engineering in 1989, the Distinguished Physics Alumnus Award of the University of Maryland, and several medals for distinguished accomplishments in science, engineering and innovation. In 2004, Discover magazine gave Dr. Fischell their annual Technology for Humanity award. In 2008, Dr. Fischell received the honorary degree of Doctor of Humane Letters from the Johns Hopkins University in recognition of his many lifesaving inventions. From June 2009 until March 2011, Dr. Fischell was a director of InspireMD, Inc. (OTCBB: NSPR), a medical device company focusing on the development and commercialization of its proprietary stent system, MGuard. Dr. Fischell received his BSME degree from Duke University and MS and Sc.D. degrees from the University of Maryland. At the White House on May 16, 2016, President Obama presented to Dr. Fischell the National Medical of Technology and Innovation, the highest award in the USA for achievements in innovative technology. The Board has determined that Dr. Fischell is suited to serve due to his extensive diabetes and medical device experience. 39 Luis Malave has served as a Director of the Company since June 22, 2021 and serves on our Audit Committee and Nominating, Governance and Compensation Committee. Mr. Malavé brings more than 30 years of leadership experience in the MedTech industry, primarily in diabetes management, spanning all company stages, from private startups to large-cap publicly listed companies. He has extensive expertise in product development, operations, marketing, strategic partnerships, and US FDA regulatory strategy. Since October 2017, Mr. Malavé has served as President of EOFLOW CO. Ltd., a company listed on the Korea Stock Exchange that has developed a wearable disposable insulin pump. From October 2014 to June 2016, he was COO of Mikroscan Technologies. Prior to that, Mr. Malavé was the President and CEO of Palyon Medical, maker of an implantable drug-delivery system that spun out from German medical-technology giant Fresenius SE. Prior to Palyon, he spent nearly a decade at insulin pump maker Insulet Corp., including as its Senior Vice President of Research, Development and Engineering, and as Chief Operating Officer. He also held various senior positions at Medtronic and MiniMed, overseeing product development of various diabetes management devices. Mr. Malavé earned his Bachelor’s degree in Mathematics and Computer Science from the University of Minnesota, a Master’s degree in Software Engineering from the University of St. Thomas, and an MBA from the University of Maryland. Shimon Rapps was appointed as a Director of the Company on July 31, 2019. He is member of the Audit Committee. Mr. Rapps currently serves as Director of Venture and Private Equity for a New York based single family office and is the founder of Three Strands Capital Group, a boutique merchant banking and investment advisory firm. Previously he served as Head of Investment Banking at Andrew Garrett, Inc., a full-service investment bank and wealth management firm. His experience spans equity and debt financings, mergers and acquisitions, private placements and IPO’s. He has extensive expertise with both public and private, emerging growth and lower middle market companies, and regularly advises CEO’s, CFO’s and Boards of Directors on matters of corporate governance and strategy. He holds the Series 7, 24, 63, and 66 licenses and is a Certified Public Accountant (inactive). The Board has determined that Mr. Rapps is suited to serve due to his extensive investment banking and public company experience. Andrew Sycoff has served as a Director of the Company since July 8, 2019, and is a member of the Nominating, Governance and Compensation Committee. Mr. Sycoff is the founder, Chief Executive Officer and Chairman of the Board of Andrew Garrett, Inc., a full-service investment bank providing wealth management and corporate advisory services, for which he has served as CEO and Chairman continuously since 1992. Client sectors include high net worth individuals and early to middle market stage companies. Mr. Sycoff holds Series 7 and 24 licenses. Mr. Sycoff has been actively investing in and advising companies for over 25 years and has extensive experience in the areas of securities brokerage, Capital Markets, Corporate Advisory and Mergers & Acquisitions. Mr. Sycoff previously served on the board of Brokerage America and Paragon Industries Corp., an electronics contract manufacturer. The Board has determined that Mr. Sycoff is suited to serve due to his extensive investment banking and public company experience. Erin Carter has served as a Director of the Company since August 25, 2023, and is the Chair of its Audit Committee. Ms. Carter brings 30 years of executive level finance experience in the medical device industry. From 2012 until March of 2023, she held various senior roles with Medtronic, most recently serving as Chief Financial Officer and Vice President of Finance for their $9B Neuroscience division. In addition, during her tenure at Medtronic she grew the Gastrointestinal Solutions division from early tech start-up acquisition of $36M to revenue of $450M in 5 years through organic growth and multiple acquisitions. Prior to Medtronic, Ms. Carter served as Director of Finance at Boston Scientific and as VP of Accounting and Reporting at UnitedHealth Group. Prior to that, she served as Assistant Controller for Arterial Vascular Engineering, where she was instrumental in guiding the rapid growth of the company from 200 employees to over 4,000 in under five years. During this time, she managed the integration of two acquisitions and subsequently that company’s sale to Medtronic. Ms. Carter holds a B.S. in Business Administration from California Polytech State University and is a Certified Public Accountant (inactive) in the State of California. 40 OUR EXECUTIVE OFFICERS The table below sets forth the names and ages of our executive officers as of the date of this Registration Statement and all positions with the Company presently held by each such person. Immediately following the table is biographical information for each of our executive officers, including the positions held by, and principal areas of responsibility of, each such person during the last five years. Name Age Position Paul V Goode, PhD 56 Chief Executive Officer James S Cardwell 64 Chief Financial Officer JP Thrower 54 Vice President of Engineering Mark Tapsak, PhD 55 Vice President of Technology Drinda Benjamin 48 Vice President of Marketing Paul V Goode, PhD most recently served as Vice President of Product Development at Orchestra Biomed where he oversaw development of its implantable cardiac stimulator system for hypertension. Prior to Orchestra, from 2010 until July 2019 Paul served in several executive roles at EndoStim, including Senior Vice President of R&D, Chief Technology Officer, and Interim CEO. From 2006 through 2010 he served as VP of Research and Development at Metacure and from 2004 through 2006 Mr. Goode served as Director of Engineering at Impulse Dynamics. Prior to that, Mr. Goode was employed as Director of Engineering at DexCom and as Senior Engineer at MiniMed. Paul received his BS, MS and PhD degrees from North Carolina State University. James S Cardwell appointed October 11, 2023 has over 16 years of experience as a Chief Financial Officer and Chief Operating Officer with a concentration in both SEC financial reporting and tax compliance. He has served as the Chief Operating Officer of the CFO Squad LLC, an accounting firm, since July 2015. In connection with his role at the CFO Squad LLC, he also served as interim Chief Financial Officer at several public entities and currently serving including Cerro de Pasco Resources, Inc. (CSE:CDPR), a Canadian mining company; Stemtech Corporation (OTC:GNTW) , a nutrition supplement company; and previously served as CFO for NanoVibronix, Inc. (Nasdaq: NAOV), a medical device company; Esports Entertainment Group (Nasdaq: GMBL), an esports and online gambling company; Artemis Acquisition Corporation, a SPAC in the Healthcare Industry and others. Mr. Cardwell started his public accounting career at Arthur Andersen & Co. (St. Louis). Mr. Cardwell has extensive experience in corporate structure, financial reporting and modelling, mergers and acquisition, quality of earnings and business analysis, SEC reporting, tax and compliance. James P Thrower joined the Company in December 2021 as its second U.S. employee. He is a seasoned engineering and global product development leader with a track record of successfully leading large healthcare technology-focused projects across multiple geographies from prototype design through clinical trials and FDA submissions. From June 2019 until December 2021, he held senior positions at Sterling Medical Devices and from 2005 to June 2019 he held various senior positions at Mindray DS USA Inc. Prior to that Mr. Thrower was a senior software and electrical engineer at DexCom, Inc. He earned his bachelor’s degree in both Electrical Engineering and Computer Engineering, as well as his MSc and PhD in Electrical Engineering from North Carolina State University. He is a published author in numerous industry publications and is a named inventor on over 120 patents. Mark Tapsak, PhD joined the Company in September 2022 as its Vice President of Technology. Mark brings over 25 years of experience in the diabetes industry as a medical device research scientist, focused on polymer synthesis, polymer characterization, medical device design and intellectual property. At GlucoTrack, he will lead the recently announced R&D program for a novel implantable CGM for those with Type 1 diabetes. Mark joins the Company from Diabetic Health, Inc., a developer of specialty coatings utilized in continuous glucose monitoring sensors and insulin infusion sets, where he served as President. Over his career, Mark held senior positions at several diabetes management companies including as Senior Scientist at DexCom where he oversaw sensor electrochemical performance, biointerface design and membrane technology, and as Senior Chemist at Medtronic, Inc. He has also taught as a Professor of Chemistry and Biochemistry and served as the Assistant Dean of Science and Technology and as Dean of Graduate Programs and Sponsored Research at Bloomsburg University. He has authored dozens of industry publications with thousands of citations and is a named inventor of 68 patents, of which over 50 are DexCom assigned patents. He received his Bachelor of Educational Studies in Chemistry and Photographic Sciences from St. Cloud State University and his PhD in Polymer Chemistry from the University of Southern California. 41 Drinda Benjamin joined the Company in July 2023 as its Vice President of Marketing. Drinda has 25 years of experience in the medical device industry from diabetes to surgical robotics. She brings extensive diabetes device experience with a focus on the commercialization of health technology. Within diabetes, she has past experiences in product development, strategic marketing, and both upstream and downstream marketing in the areas of blood glucose monitoring, CGM, insulin delivery and closed loop systems. Drinda joins the company from Intuity Medical where she developed and executed commercial strategies for a novel integrated blood glucose monitoring system. Prior to this, she led business development, partnership strategy and closed loop system programs for Senseonics, manufacturer of the 1st implantable CGM launched in the US and Europe. She has also held marketing roles with Abbott Diabetes Care and Medtronic Diabetes. Drinda has an M.B.A. from Georgetown University’s McDonough School of Business and a Bachelor of Science in Engineering degree from Princeton University. 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 enables 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 Report and is not incorporated by reference herein. Audit Committee Our Audit Committee consists of Erin Carter, who is the chair of the committee, Shimon Rapps, and Luis Malave. Our Board has determined that each of the members of our Audit Committee satisfies the Nasdaq Marketplace Rules and SEC independence requirements. The functions of this committee include, among other things: ● evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors; ● reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services; ● reviewing our annual and quarterly financial statements and reports, including the disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and discussing the statements and reports with our independent auditors and management; ● reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy, and effectiveness of our financial controls; ● reviewing and approving, in accordance with the Company’s policies, any related party transaction as defined by applicable rules and regulations ● reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; and ● reviewing and evaluating on an annual basis the performance of the audit committee, including compliance of the audit committee with its charter. 42 The Board has determined that Erin Carter qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations and meets the financial sophistication requirements of the Nasdaq Marketplace Rules. In making this determination, the Board has considered her 30 years’ extensive financial experience and business background. Both our independent registered public accounting firm and management periodically meet privately with our Audit Committee. Insider Trading Policy Effective January 1, 2024, we adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers, and employees, which are reasonably designed to promote compliance with insider trading laws, rules and regulations, and applicable Nasdaq listing standards (the “Insider Trading Policy”). The foregoing description of the Insider Trading Policy does not purport to be complete and is qualified in its entirety by the terms and conditions of the Insider Trading Policy, a copy of which is attached hereto as Exhibit 19 and is incorporated herein by reference. Compliance With Section 16(a) of the Exchange Act Section 16(a) of the Exchange Act requires the Company’s directors, executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the SEC reports of beneficial ownership and reports of changes in beneficial ownership in the Company’s securities. Based solely upon a review of Forms 3, 4 and 5, and amendments thereto, filed electronically with the SEC during the year ended December 31, 2023, the Company believes that all Section 16(a) filings applicable to its directors, officers, and 10% stockholders were filed on a timely basis during the year ended December 31, 2023, except that Erin Carter filed one late Form 3. Item 11. Executive Compensation. The following table sets forth the compensation paid to our officers for the years ended December 31, 2023 and 2022. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to named executive officers. Name and Principal Position Year Salary Equity Awards (1) All Other Compensation (2) Total Paul V Goode 2023 $ 225,000 $ 258,243 $ - $ 356,237 Chief Executive Officer 2022 $ 200,641 $ 318,348 $ 21,267 $ 485,685 James Thrower 2023 $ 230,000 $ 34,112 $ $ 264,112 Vice President of Engineering 2022 $ 230,000 $ 92,892 $ 38,470 $ 361,362 Mark Tapsak, PhD 2023 $ 165,000 $ 11,214 $ - $ 176,214 Vice President of Technology 2022 $ 41,250 $ 5,411 - $ 46,661 Jolie Kahn 2023 $ 135,000 $ - $ 98,500 $ 233,500 Chief Financial Officer 2022 $ 180,000 $ - $ - $ 120,000 (1) In accordance with SEC rules, the amounts in this column reflect the dollar amounts to be recognized for financial statement reporting purposes with respect to the years ended December 31, 2023 and 2022 in accordance with ASC Topic 718. Fair value is based on the Black-Scholes option pricing model using the market price of the underlying shares at the grant date. The Company recognized $131,237 of stock compensation expense related to Common Stock due to Paul Goode after satisfying the first performance milestone of the Intellectual Property Purchase Agreement signed in October 2022. This milestone was the successful completion of the Feasibility Phase for the Glucotrack CBGM project. (2) Jolie Kahn received $62,500 as compensation for services during the April 2023 financing and $36,000 severance as part of her separation agreement with the Company. 43 Employment and Consulting Agreements James S Cardwell On October 11, 2023, in connection with Mr. Cardwell’s appointment as the Company’s Chief Financial Officer, Mr. Cardwell entered into a consulting agreement (the “Cardwell Consulting Agreement”) with the Company. Pursuant to the terms of the Cardwell Consulting Agreement, Mr. Cardwell will perform all duties typically required of a Chief Financial Officer. As compensation for his services, the Company shall pay Mr. Cardwell One Thousand Five Hundred Dollars ($1,500) per month. The Cardwell Consulting Agreement is for a term of one year. Either party may terminate the agreement upon thirty (30) day written notice. Drinda Benjamin On July 21, 2023, entered into an employment agreement with Drinda Benjamin as its Vice President of Marketing. Under the terms of the agreement, the Company agrees to pay base salary of $215,000 per annum and subject to annual increases or 3%. The Company also granted 222,016 options to purchase Common Stock at $1.36 per share which vests monthly over three years. Drinda Benjamin is eligible to receive an annual bonus of up to 15% of the base salary, to be paid in cash, as reasonably determined by the Compensation Committee. There was no accrued bonus for 2023. Outstanding Equity Awards at Fiscal Year-End Table Option Awards Name Number of securities underlying outstanding options (#) exercisable Number of securities underlying outstanding options (#) unexercisable Option exercise price ($) Option expiration date Paul Goode 227,550 100,105 5.20 10/30/2031 James P. Thrower 174,864 87,414 5.20 12/01/2031 Mark Tapsak, PhD 68,895 96,434 5.20 10/10/2032 Drinda Benjamin 104,856 117,160 1.36 8/21/2033 44 Compensation of Directors Name Fees earned and paid in cash ($) Fees earned and paid Stock awards ($) Total ($) Dr. Robert Fischell 70,000 70,000 Luis Malave 54,238 15,762 70,000 Andrew Sycoff 52,500 17,500 70,000 Shimon Rapps 70,000 70,000 Allen Danzig 70,000 70,000 Erin Carter - 23,333 23,333 We pay each of our non-employee directors an annual retainer either in cash or stock, at the director’s election, for service on the Board. All retainers are payable in arrears in four equal quarterly installments. The retainers paid to non-employee directors for service on the Board is $70,000 per year in 2023 and there is no additional fee for committee service. Beginning in 2024, compensation to Board members increased to $100,000 and the Chairman increased to $120,000. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The table below sets forth information regarding the beneficial ownership of our Common Stock by (i) our directors and named executive officers (including persons who served as principal executive officer and principal financial officer during a portion of the fiscal year ended December 31, 2023) and all the named executives and directors as a group and (ii) any other person or group that to our knowledge beneficially owns more than five percent of our outstanding shares of Common Stock. 45 The information contained in this table is as of March 4, 2024. At that date, we had 26,756,369 shares of Common Stock outstanding. A person is deemed to be a beneficial owner of shares if he has the power to vote or dispose of the shares. This power can be exclusive or shared, direct or indirect. In addition, a person is considered by SEC rules to beneficially own shares underlying options or warrants that are presently exercisable or that will become exercisable within sixty (60) days. Name of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Ownership Named Executives and Directors Drinda Benjamin (1) 61,680 * Allen E. Danzig 19,435 * Dr. Robert Fischell (2) 38,247 * Paul Goode (3) 375,010 1.4 % James Cardwell - - Erin Carter 90,197 * Luis Malave 99,508 * Shimon Rapps (4) 1,030,550 3.9 % Andrew Sycoff (5) 2,768,718 10.4 % Mark Tapsak (6) 143,360 * James Thrower (7) 211,294 * All directors and Named Executive Officers as a group (11 persons) 4,837,999 17.7 % Over 5% Shareholders John A Ballentyne Rev Trust 08/01/2017 (8) 5,100,166 19.1 % Hal Mintz (9) 2,087,130 7.9 % Alma Diversified Holdings LLC (10) 2,575,938 9.7 % Over 5% Shareholders * Less than 1%. (1) 61,680 options deemed vested within 60 days of March 4, 2024. (2) Ownership includes (i) 31,734 shares of Common Stock owned individually, (ii) 3,316 owned jointly by Dr. Fischell and his wife; and (iii) 3,197 Options deemed vested within 60 days of March 4, 2024. (3) Ownership includes (i) 101,950 shares of Common Stock owned individually and (ii) 273,060 Options deemed vested within 60 days of March 4, 2024. 46 (4) Ownership includes only 10,598 shares of Common Stock owned individually. SDR Diversified Holdings, LLC, an entity owned by Leah Rapps, the wife of Shimon Rapps, owns 1,009,354 shares of common stock. Leah Rapps has voting control and investment power over SDR Diversified Holdings, LLC. Ms. Rapps also owns 10,598 shares in her personal name. Mr. Rapps disclaims beneficial ownership in the shares and warrants held by his wife and by SDR Diversified Holdings, LLC. (5) Ownership includes: (i) 76,279 shares of common stock owned by Mr. Sycoff; and (ii) 116,501 common stock owned by Andrew Garrett, Inc. Mr. Sycoff has voting power and investment control over the shares of common stock held by Andrew Garrett, Inc. Alma Diversified Holdings LLC, an entity owned by Sharon Sycoff, the wife of Mr. Sycoff owns 2,575,938 shares of common stock. Sharon Sycoff has voting power and investment control over the shares held by Alma Diversified Holdings LLC and Mr. Sycoff disclaims beneficial ownership in the shares held by Alma Diversified Holdings LLC. (6) Ownership includes: (i) 50,000 shares of common stock owned by Tapsak Enterprises LLC (ii) 1,500 shares of common stock owned by Stephen Tapsak, son of Mark Tapsak, and iii) 91,860 Options deemed vested within 60 days of March 4, 2024. Tapsak Enterprises LLC is jointly owned by Mark Tapsak and his wife, Karena Tapsak. (7) 211,294 Options deemed vested within 60 days of March 4, 2024. (8) Ownership includes: (i) 1,396 shares of common stock owned individually and (ii) 5,098,770 owned by John A. Ballantyne Revocable Trust 08/01/2017. The address of John A. Ballantyne Rev Trust 08/01/2017 is 7410 Claire Drive South, Fargo ND 58104. John A. Ballantyne has voting and investment control over the shares held by John A. Ballantyne Rev Trust 08/01/2017. (9) Ownership includes 2,087,130 shares of common stock held by Sabby Volatility Warrant Master Fund, Ltd. Hal Mintz has control over Sabby Management LLC that has voting and control over the shares held by Sabby Volatility Warrant Master Fund, Ltd. The address of Sabby Volatility Warrant Master Fund, Ltd. is c/o Ogier Fiduciary Services (Cayman) Limited 89 Nexus Way, Camana Bay, Grand Cayman KY1-9007 Cayman Islands. (10) Ownership includes 2,575,938 directly by Alma Diversified Holdings LLC. The address of Alma Diversified Holdings LLC is 1294 Albany Post Rd, Gardiner NY 12525. Item 13. Certain Relationships and Related Transactions, and Director Independence. On February 13, 2024, the Company entered into an Exchange Agreement with Andrew Garrett Inc and affiliates (the “Holders”), pursuant to which the Company and the Holders agreed to replace 4,381,953 warrants exercisable to common shares owned by the Holders in exchange for 3,593,203 shares of Common Stock to be issued by the Company. On October 7, 2022, the Company announced that it has acquired certain intellectual property related to a long-term implantable continuous blood glucose monitor (“CBGM”) from Paul V. Goode, the Chief Executive Officer and that it intends to develop the technology to address the growing Type 1 and insulin-dependent Type 2 diabetes market. Mark Tapsak, Officer was also providing services including the laboratory and consultants via Tapsak Enterprises, LLC to the Company. In 2024, the consultants have become employees of the Company, and the laboratory has been leased directly by the Company and Tapsak Enterprises will have limited, or no related party transactions in 2024. James Cardwell, an officer and CFO is also the COO of CFO Squad LLC providing financial reporting services to the Company. 47 Director Independence The Board has evaluated each of its directors’ independence from the Company based on the definition of “independence” established by Nasdaq and has determined that e ach of the current members of GlucoTrack’s Board of Directors is independent directors. The Board has further determined that each member of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee is “independent” under applicable Nasdaq rules. The Board has also determined that each member of our audit committee is “independent” for purposes the Exchange Act. In its evaluation of each director’s or nominee’s independence from the Company, the Board reviewed whether any transactions or relationships currently exist or existed during the past year between each director or nominee and the Company and its subsidiaries, affiliates, equity investors, or independent registered public accounting firm, and whether there were any transactions or relationships between each director or nominee and members of the senior management of the Company or their affiliates. Item 14. Principal Accountant Fees and Services. Fahn Kanne served as the independent registered public accounting firm to audit our books and accounts for the fiscal years ended December 31, 2022 and 2023. The table below presents the aggregate fees billed for professional services rendered by Fahn Kanne for the year ended December 31, 2023 and 2022. 2023 2022 Audit fees $ 145,000 96,000 Audit-related fees - - Tax fees $ - 10,000 All other fees - - Total fees $ 145,000 106,000 In the above table, “audit fees” are fees billed for services provided related to the audit of our annual financial statements, quarterly reviews of our interim condensed financial statements, and services normally provided by Fahn Kanne in connection with regulatory filings or engagements for those fiscal periods. “Tax fees” consist of amounts billed by an associated entity of Fahn Kanne for services in connection with the preparation of our federal and state tax returns. 48 PART IV Item 15. Exhibits, Financial Statement Schedules. Financial Statements The financial statements of the Company filed herewith are set forth in Part II, Item 8 of this report. Exhibit Index 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) 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 Amendment to Certificate of Incorporation of Integrity Applications, Inc. (16) 3.5 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 Certificate of Designation of Preferences and Rights of Series A 5% Convertible Preferred Stock (2) 4.7 Form of Series B Securities Purchase Agreement (3) 4.8 Form of Series B-1 Common Stock Purchase Warrant (3) 4.9 Form of Series B-2 Common Stock Purchase Warrant (3) 4.10 Form of Series B Registration Rights Agreement (3) 4.11 Certificate of Designation of Preferences and Rights of Series B 5.5% Convertible Preferred Stock (3) 4.12 Form of Series C Securities Purchase Agreement (6) 4.13 Form of Series C-1 Common Stock Purchase Warrant (6) 4.14 Form of Series C-2 Common Stock Purchase Warrant (6) 4.15 Form of Series C Registration Rights Agreement (6) 4.16 Certificate of Designation of Preferences and Rights of Series C 5.5% Convertible Preferred Stock (6) 4.17 Form of Series D Securities Purchase Agreement (10) 4.18 Form of Series D-1 Common Stock Purchase Warrant (10) 4.19 Form of Series D-2 Common Stock Purchase Warrant (10) 4.20 Form of Series D-3 Common Stock Purchase Warrant (10) 4.21 Form of Series D Registration Rights Agreement (10) 4.22 Form of Prefunded Warrant (12) 10.1* Integrity Applications, Inc. 2010 Incentive Compensation Plan (1) 10.2* Amendment No. 1 to Integrity Applications, Inc. 2010 Incentive Compensation Plan (11) 10.3* Amendment No. 2 to Integrity Applications, Inc. 2010 Incentive Compensation Plan (9) 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 (9) 10.7* Amended and Restated Personal Employment Agreement, effective as of April 7, 2017, between A.D. Integrity Applications Ltd. and David Malka (9) 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 (5) 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 Form of Underwriting Agreement, dated April 13, 2023, between GlucoTrack, Inc. and Aegis Capital Corp. (12) 10.16 * Consulting Agreement, dated October 11, 2023, by and between GlucoTrack, Inc. and James S. Cardwell (13) 10.17 Form of Exchange Agreement, dated February 13, 2024, by and among GlucoTrack, Inc. and certain holders thereof (14) 10.18* Consulting Agreement, dated August 1, 2019, by and between Integrity Applications, Inc. and Jolie Kahn (15) 10.19* Employment Agreement, dated October 19, 2021, by and between Integrity Applications, Inc. and Paul V. Goode (17) 49 14.1 Code of Ethics (7) 19 Insider Trading Policies and Procedures, adopted March 22, 2024.*** 21.1 Subsidiaries of Integrity Applications, Inc. (8) 23.1 Consent of Grant Thornton Israel 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 *** 97.1 Policy Related to Recovery of Erroneously Awarded Compensation, adopted November 30, 2023.*** 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 Amendment No. 3 to the Company’s Registration Statement on Form S-1, as filed with the SEC on November 10, 2011. (6) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 14, 2016. (7) 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. (8) Previously filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on November 7, 2017. (9) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 15, 2017 (10) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 7, 2018. (11) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 23, 2016. (12) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 17, 2023. (13) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on October 12, 2023. (14) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 16, 2024. (15) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on August 8, 2019. (16) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 23, 2020. (17) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on October 25, 2021. * Compensation Plan or Arrangement or Management Contract. ** Previously filed. *** Filed herewith. 50 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 28, 2024. GLUCOTRACK, INC. By: /s/ Paul Goode Name: Paul Goode Title: Chief Executive Officer (Principal Executive Officer) By: /s/ James Cardwell Name: James Cardwell 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/ James Cardwell Chief Financial Officer March 28, 2024 James Cardwell (Principal Executive and Financial Officer and Principal Accounting Officer) /s/ Robert Fischell Director March 28, 2024 Dr. Robert Fischell /s/ Shimon Rapps Director March 28, 2024 Shimon Rapps /s/ Paul V. Goode CEO March 28, 2024 Paul V. Goode /s/ Luis Malave Director March 28, 2024 Luis Malave 51 GLUCOTRACK INC. Consolidated Financial Statements as of December 31, 2023 Table of Contents Page Report of Independent Registered Public Accounting Firm – PCAOB ID NUMBER 1375 F-2 Consolidated Financial Statements Balance Sheets F-4 Statements of Operations and Comprehensive Loss F-5 Statements of Changes in Stockholders’ Equity F-6 Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 – 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, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, 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, 2023, there is an accumulated deficit of $109,853. 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 consolidated 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. F- 2 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Going Concern As described further in Note 1B, the Company has not yet generated significant revenues from its previous product and the development and commercialization of its current product is expected to require substantial additional expenditures. Thus, the Company is dependent upon external sources for financing its operations. As of December 31, 2023, the Company has incurred accumulated deficit of $109,853. Furthermore, the Company has generated recurring operating losses and negative operating cash flow. As of December 31, 2023, the remaining balance of cash and cash equivalents was determined by the Company’s management as insufficient for the Company to realize its business plans for the twelve-month period subsequent to the reporting period. Accordingly, the Company’s management has 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. However, Company’s management has concluded that such plans do not alleviate the substantial doubt regarding to the Company’s ability to continue as a going concern as it was determined by management that there can be no assurance that the Company will succeed in obtaining the necessary financing or generating sufficient revenues from sales of its current product in order to continue its operations as a going concern. We identified the assessment of the Company’s ability to continue as a going concern as a critical audit matter. The principal considerations for our determination are due to significant judgment required by management when assessing the Company’s ability to continue as a going concern, taking into consideration management plans, the Company’s available funds, the ability of the Company to generate revenues from sales of its current product and the risk of bias in management’s judgments and assumptions in their determination. Our audit procedures related to this matter included the following, among others. We reviewed and evaluated management’s plans for dealing with the adverse effect of these conditions and events. We inquired Company management and reviewed the company records to assess whether there are additional factors that might contribute to the uncertainties disclosed. We evaluated the reasonableness of significant assumptions used by management in its determination. We assessed whether the Company’s determination that there is substantial doubt about its ability to continue as a going concern was adequately disclosed. /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 28, 2024 F- 3 GLUCOTRACK INC. CONSOLIDATED BALANCE SHEETS In thousands of US dollars (except stock data) December 31, 2023 December 31, 2022 Current Assets Cash and cash equivalents (Note 2D) 4,492 2,312 Other current assets 376 67 Total current assets 4,868 2,379 Property and equipment, net 27 40 Restricted cash (Note 2D) 10 19 TOTAL ASSETS 4,905 2,438 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable 839 672 Other current liabilities 673 341 Total current liabilities 1,512 1,013 Non-current Liabilities Loans from stockholders (Note 3) 196 195 Total liabilities 1,708 1,208 Commitments and contingent liabilities (Note 4) - - Stockholders’ Equity (Note 5) Common Stock of $ 0.001 par value (“Common Stock”): 500,000,000 shares authorized as of December 31, 2023 and 2022; 20,892,193 and 15,500,730 shares issued and outstanding as of December 31, 2023 and 2022, respectively 20 15 Common Stock of $ 0.001 par value (“Common Stock”): 500,000,000 shares authorized as of December 31, 2023 and 2022; 20,892,193 and 15,500,730 shares issued and outstanding as of December 31, 2023 and 2022, respectively 20 15 Additional paid-in capital 112,966 103,095 Receipts on account of shares 48 4 Accumulated other comprehensive income 16 17 Accumulated deficit ( 109,853 ) ( 101,901 ) Total stockholders’ equity 3,197 1,230 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 4,905 2,438 The accompanying notes are an integral part of these consolidated financial statements F- 4 GLUCOTRACK INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS In thousands of US dollars (except stock and per stock amounts) 2023 2022 Research and development expenses (Note 6) 4,704 1,967 Marketing expenses 122 - General and administrative expenses (Note 7) 2,278 2,465 Total operating expenses 7,104 4,432 Operating loss 7,104 4,432 Other expense - 14 Finance income, net ( 7 ) ( 11 ) Loss for the year 7,097 4,435 Other comprehensive loss (income): Foreign currency translation adjustment 1 ( 23 ) Comprehensive loss for the year 7,098 4,412 Basic and diluted loss per share (Note 2J) 0.38 0.29 Weighted average number of Common Stock outstanding used in computing basic and diluted net loss per share 20,760,266 15,474,600 The accompanying notes are an integral part of the consolidated financial statements. F- 5 GLUCOTRACK INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Numbers of Shares Amount Additional Paid-in Capital account of shares Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity In thousands of US Dollars (except share data) Common Stock Receipts on Accumulated Numbers of Shares Amount Additional Paid-in Capital account of shares Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity 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 Balance as of January 1, 2023 15,500,730 15 103,095 4 17 ( 101,901 ) 1,230 Balance 15,500,730 15 103,095 4 17 ( 101,901 ) 1,230 Loss for the year - - - - - ( 7,097 ) ( 7,097 ) Other comprehensive loss - - - - ( 1 ) - ( 1 ) Net proceeds received from underwritten U.S. public offering 5,376,472 5 8,725 - - - 8,730 Deemed dividend resulted from trigger of down round protection feature of certain warrants granted - - 855 - - ( 855 ) - Stock-based compensation - - 281 - - - 281 Issuance of restricted shares as compensation towards directors 14,991 - (*) 10 44 - - 54 Balance as of December 31, 2023 20,892,193 20 112,966 48 16 ( 109,853 ) 3,197 Balance 20,892,193 20 112,966 48 16 ( 109,853 ) 3,197 (*) Less than 1. The accompanying notes are an integral part of the consolidated financial statements. F- 6 GLUCOTRACK INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 2023 2022 Cash flows from operating activities: Loss for the year ( 7,097 ) ( 4,435 ) Adjustments to reconcile loss for the year to net cash used in operating activities: Depreciation 13 23 Capital loss from sale of property and equipment - 1 Stock-based compensation 281 439 Issuance of restricted shares as compensation to directors 54 48 Linkage difference on principal of loans from stockholders 1 11 Changes in assets and liabilities: Increase in other current assets ( 309 ) ( 28 ) Increase in accounts payable 167 74 Increase (Decrease) in other current liabilities 332 138 Net cash used in operating activities ( 6,558 ) ( 3,729 ) Cash flows from investment activities: Proceeds from sale of property and equipment - 2 Purchase of property and equipment - ( 1 ) Net cash provided by investment activities - 1 Cash flows from financing activities Net proceeds received from underwritten U.S. public offering (Note 5B) 8,730 - Net cash provided by financing activities 8,730 - Effect of exchange rate changes on cash and cash equivalents ( 1 ) ( 54 ) Change in cash, cash equivalents, and restricted cash 2,171 ( 3,782 ) Cash, cash equivalents, and restricted cash at beginning of the year 2,331 6,113 Cash, cash equivalents, and restricted cash at end of the year 4,502 2,331 The accompanying notes are an integral part of the consolidated financial statements. F- 7 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 diabetes technology devices for use by people with diabetes. 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 bench 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 4B below). On November 13, 2023, the Company shifted its strategic focus from non-invasive point-in-time glucose monitoring to CGM technology. The Company and Integrity Israel are considered collectively as the “Company.” F- 8 B. Going concern uncertainty To date, the Company had not yet commercialized the Glucotrack CBGM product. Further development and commercialization efforts are expected to require substantial additional expenditures. Therefore, the Company is dependent upon external sources for financing its operations. As of December 31, 2023, the Company has incurred accumulated deficit of $ 109,853 . Furthermore, the Company has generated operating losses and negative operating cash flow for all reported periods. As of December 31, 2023, the balance of cash and cash equivalents amounted to $ 4,492 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 conditions 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. During the year ended December 31, 2023, the Company raised net proceeds of $ 8,730 through completion of underwritten public offering (see also Note 5B). 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 $ 90,000 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 CBGM 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. F- 9 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. Management believes that there are no critical accounting estimates in these financial statements. 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 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”. SCHEDULE OF OFFICIAL EXCHANGE RATE 2023 2022 Official exchange rate of NIS 1 to US dollar 0.272 0.298 Decrease of the official exchange rate of NIS 1 to US dollar during the year: ( 8.86 )% ( 3.72 )% 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 and restricted cash The Company 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. Restricted cash is invested in certificates of deposit, which are used to secure Integrity Israel’s obligations in respect of its credit card. 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 2023 2022 In thousands of US dollars December 31, December 31, 2023 2022 Cash and cash equivalents $ 4,492 $ 2,312 Restricted cash $ 10 $ 19 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 4,502 $ 2,331 F- 10 E. 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 and comprehensive loss. 2. Rates of depreciation: SCHEDULE OF PROPERTY AND EQUIPMENT, RATES OF DEPRECIATION Years Computers 3 Furniture and office equipment 7 - 15 F- 11 F. 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. G. Income tax The Company 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 Company 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 Company’s accounting policy is to classify interest and penalties relating to uncertain tax positions under income taxes, however the Company did not recognize such items in its fiscal 2023 and 2022 financial statements and did not recognize any liability with respect to unrecognized tax position in its balance sheet. F- 12 H. Research and development expenses Research and development expenses are charged to operations and comprehensive loss, as incurred. I. 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 . See also Note 4A below. F- 13 J. Basic and diluted loss per share Basic loss per share is computed by dividing the loss for the period applicable (after considering the effect of deemed dividend related to trigger of down round protection feature) for Common Stockholders and the holders of the pre-funded warrants dividend by the weighted average number of shares of Common Stock outstanding and shares of Common Stock to be issued upon achievement of first performance milestone (see Note 4A below) and upon exercise of pre-funded warrants (see Note 5B below) 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 proceeds to be received 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 SCHEDULE OF ANTIDILUTIVE NET LOSS AND WEIGHTED AVERAGE 2023 2022 In thousands of US dollars (except share data) Year ended December 31, 2023 2022 Numerator: Net loss $ 7,097 $ 4,435 Deemed dividend related to trigger of down round protection feature (see Note 5C3 below) 855 - Net loss attributable to common stockholders $ 7,952 $ 4,435 Denominator: Shares of Common Stock used in computing basic and diluted net loss per common stock 19,313,063 15,474,600 Shares of Common Stock to be issued upon exercise of pre-funded warrants (see Note 5B below) 1,397,066 - Shares of Common Stock to be issued upon achievement of first performance milestone (see Note 4B below) 50,137 - Weighted average number of Common Stock outstanding used in computing basic and diluted net loss per share 20,760,266 15,474,600 Basic and diluted net loss per common stock $ 0.38 $ 0.29 K. Stock-based compensation The Company 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 Company 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. Since January 1, 2019, share-based payments to non-employees are accounted in accordance with ASC 718. F- 14 L. 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 Company. The Company 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 Company (cash and cash equivalents, accounts payable and other current assets and liabilities) approximates their carrying value. The Company did not estimate the fair value of the loans received from stockholders since their repayment schedule has not yet been determined. M. Concentrations of credit risk Financial instruments that potentially subject the Company 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 a major bank in the United States. Management believes that such financial institutions are financially sound, accordingly, minimal credit risk exists with respect to these financial instruments. The Company does not have any significant off-balance-sheet concentration of credit risk, such as foreign exchange contracts, option contracts or other foreign hedging arrangements. N. Contingencies The Company 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. O. Warrants with down-round protection 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 in accordance with the provisions of ASU 2017-11, “Earnings Per Share” (ASU 2017-11). Based on its evaluation, management has determined that such warrants with down-round protection feature are eligible for equity classification. Accordantly, upon the occurrence of an event that triggers a down round protection feature (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 calculation. See also Note 2K above. P. 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. Q. Recently issued accounting pronouncements, not yet adopted 1. In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for the Company’s annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on the consolidated financial statement disclosures. 2. In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topics 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically relating to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on the consolidated financial statement disclosures. F- 15 NOTE 3 – LOANS FROM STOCKHOLDERS During the years 2003-2004, Integrity Israel received loans from stockholders (four separate lenders) in a total amount of approximately $ 400 . However, following the repayment of the entire balance to certain lender in 2015, the remaining balance as of December 31, 2022 is approximately $ 196 . The loans are indexed to the Israeli consumer price index from their origination date and bear no interest. The Company will be required to pay the loans, in quarterly installments, commencing on the first quarter following the first fiscal year in which the Company reports net profit in its annual report. At such time, the Company 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 Company will not be required to repay the loans during any period in which such payment would cause a deficit in the Company’s working capital. As of December 31, 2023, the Company 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 NOTE 4 – COMMITMENTS AND CONTINGENT LIABILITIES A. On March 4, 2004, the IIA provided Integrity Israel with a grant of approximately $ 93 (NIS 420 ), 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 Company’s products arising from the Development Plan up to an amount equal to $ 93 , plus interest at LIBOR from the date of grant. As to the replacement of the LIBOR benchmark rate, even though the IIA has not declared the alternative benchmark rate to replace the LIBOR, the Company does not believe it will have a significant impact. As of December 31, 2023, the remaining contingent liability with respect to royalty payment on future sales equals approximately $ 73 , excluding interest. Such contingent obligation has no expiration date. B. 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 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 obligated to issue up to 1,000,000 Common Stock to be issued based upon specified 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 Common Stock 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 Common Stock of the company that will be issued under this agreement shall be (i) restricted over a limited period of 1-year 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 fair value of 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. In the middle of June 2023, the Company achieved the first performance milestone out of the five performance milestones outlined in the Agreement executed between the Company and the Seller as of the Closing Date. As a result, upon the date of fulfillment of the performance first milestone the Company was committed to issue 100,000 restricted shares to the Seller (such shares have been issued on February 6, 2024). During the year ended December 31, 2023, the Company recorded stock-based compensation expenses of $ 131 (as part of research and development expenses), which represents the quoted price of its Common Stock at the Closing Date, after taking into consideration a discount for lack of marketability at a rate of 30.4 % over a restriction period of 1-year. As of December 31, 2023, achievement of all other performance milestones was not considered probable and thus stock-based compensation expenses were not recorded with respect to thereof. F- 17 NOTE 5 – 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. Completion of underwritten U.S. public offering On April 13, 2023, the Company completed an underwritten public offering under which the Company received gross proceeds of approximately $ 10 million for issuance of (i) 5,376,472 shares of common stock and (ii) 1,976,470 pre-funded warrants at a price to the public of $ 1.36 per share. The pre-funded warrants are exercisable for the same number of shares of common stock and may be exercised at any time until exercised in full at an exercise price of $ 0.001 . Upon satisfaction of customary closing conditions, the closing date of the above underwritten public offering was April 17, 2023 (the “Closing Date”). The Company received substantially all the pre-funded warrant’s proceeds upfront (without any conditions) as part of the pre-funded warrant’s purchase price and in return the Company is obligated to issue fixed number of 1,976,470 shares of Common Stock to the holders. Thus, pre-funded warrants were accounted for and were classified as additional paid-in capital as part of the Company’s stockholders’ equity. Total incremental and direct issuance costs amounted to $ 1,270 thousand. These expenses were deducted from additional paid-in capital as they were allocated to shares of Common Stock and pre-funded warrants. On January 3, 2024, the above pre-funded warrants have been fully exercised to 1,976,470 shares of Common Stock of the Company. C. 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 Common Stock 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 . F- 18 2. Grant of equity awards to employees A. In October 2022, the Company granted Mr. Mark Tapsak, the Vice President, Sensor Science of the Company, 115,857 options estimated at fair value of $ 22 , to purchase the same number of Common Stock, with an exercise price per share equals to the greater of (A) $ 5.2 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 period of 3 -years following the grant date. B. In August 2023, the Company granted Mrs. Drinda Benjamin, the Vice President, Marketing of the Company, 222,016 options estimated at fair value of $ 51 , to purchase the same number of Common Stock, with an exercise price per share equals to the greater of (A) $ 1.36 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 period of 3 -years following the grant date. C . During the years ended December 31, 2023 and 2022, the Company recorded stock-based compensation expenses of $ 281 and $ 439 , respectively. F- 19 D . The following table presents the Company’s stock options (excluding RSU) activity for employees and members of the Board of Directors of the Company under the Plan, for the years ended December 31, 2023 and 2022: 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, 2021 620,053 8.0 3.0 - Granted 115,857 5.2 2.7 - Forfeited or expired ( 26,923 ) 64.5 1.7 - Outstanding as of December 31, 2022 735,910 7.6 2.1 - Exercisable as of December 31, 2022 245,535 12.4 2.6 - Number of Share Options Weighted Average Exercise Price Weighted average remaining contractual life Intrinsic value $ (years) $ Outstanding as of December 31, 2022 735,910 7.6 2.1 - Granted 222,016 1.4 9.7 - Forfeited or expired ( 26,923 ) 64.5 1.7 - Outstanding as of December 31, 2023 931,003 4.5 8.0 - Exercisable as of December 31, 2023 500,984 5.6 7.9 - 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 E . During the years ended December 31, 2023 and 2022, stock options have not been exercised into Common Stock. F . 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 Years ended December 31 2023 2022 Volatility (%) 220 % 72.15 % Risk-free interest rate (%) 4.7 % 2.5 % Dividend yield (%) - - Expected life (years) 3 3 Exercise price ($) 1.4 5.2 Share price ($) 0.3 1.9 G . As of December 31, 2023, there was $ 83 of unrecognized compensation expense related to unvested stock options. The Company recognizes compensation expense on an accelerated vesting basis over the requisite service periods, which results in a weighted average period of approximately 1.9 years over which the unrecognized compensation expense is expected to be recognized. F- 21 3. Grant of equity awards to non-employees A. In connection with 2017 Offering, the Company has issued to Andrew Garrett Inc, who served as a placement agent in fundraising transaction (a) 5 -years warrants to purchase up to 4,068,498 shares of Common Stock at an exercise price of $ 3.35 per share, (b) 5 -years warrants to purchase up to 8,331 shares of Common Stock at an exercise price of $ 23.4 per share, (c) 5 -years warrants to purchase up to 8,331 shares of Common Stock at an exercise price of $ 46.8 per share and (d) 5 -years warrants to purchase up to 8,331 shares of Common Stock at an exercise price of $ 70.2 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 -years warrants to purchase up to 288,462 shares of Common Stock at an exercise price of $ 5.2 per share. B . 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 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. The incremental fair value was recognized as an immediate expense in 2022 as the warrants were fully vested at the modification date. C. Upon closing of underwritten U.S. public offering as noted in Note 5B above, a down round protection feature of all the above warrants, was triggered through the reduction of their original exercise prices from a price in a range of $ 3.35 -$ 70.2 to a price of $ 1.36 which represented the public offering price. Such reduction was accounted for in accordance with the provisions of ASU 2017-11as a deemed dividend estimated at a total amount of $ 855 thousand which was recorded as part of the additional paid-in capital versus increase of accumulated deficit. Regarding the effect of the loss per share, see also Note 2K above. D. For more information regarding the exchange of the above warrants to share of the Company’s Common Stock, see also Note 10A below. F- 22 The total compensation cost related to all of the Company’s equity-based awards recognized during the years ended December 31, 2023 and 2022 was comprised as follows: SCHEDULE OF TOTAL COMPENSATION COST EQUITY BASED AWARDS Research and Development December 31, 2023 December 31, 2022 In thousands of US dollars December 31, 2023 December 31, 2022 Research and development 176 92 General and administrative 159 395 Total compensation cost 335 487 F- 23 NOTE 6 – RESEARCH AND DEVELOPMENT EXPENSES SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSES Research and Development December 31, 2023 December 31, 2022 In thousands of US dollars Research and Development December 31, 2023 December 31, 2022 Salaries and related expenses 930 749 Professional fees 3,709 1,124 Depreciation 10 20 Vehicle maintenance - 12 Other 55 62 Total Research and Development Expense 4,704 1,967 NOTE 7 – GENERAL AND ADMINISTRATIVE EXPENSES SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES General and Administrative December 31, 2023 December 31, 2022 In thousands of US dollars General and Administrative December 31, 2023 December 31, 2022 Salaries and related expenses 340 617 Professional fees (including directors’ fee) 1,527 1,281 Vehicle maintenance - 8 Depreciation 3 3 Insurance 336 457 Other 72 99 Total general and administrative expenses 2,278 2,465 F- 24 GLUCOTRACK INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 8 – 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 2019 through 2022 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 2018 are considered final. C. Loss for the years ended December 31, 2023 and 2022 consists of the following: SCHEDULE OF INCOME TAX LOSS FOR THE YEAR 2023 2022 Year ended December 31 2023 2022 Domestic $ 6,945 $ 3,528 Foreign entity (Integrity Israel) 152 907 Total loss for the year 7,097 4,435 D. Net Operating Losses (NOL) carryforward As of December 31, 2023, the Company had cumulative Net Operating Losses (NOL) carry forward for US federal purposes of approximately $ 17 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 $ 38.4 million to offset against future taxable income for an indefinite period of time. E. For the years ended December 31, 2023 and 2022, 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 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 Company’s future tax assets are as follows: SCHEDULE OF DEFERRED TAX ASSETS Composition of deferred tax assets: 2023 2022 As of December 31 Composition of deferred tax assets: 2023 2022 Vacation accrual 66 - Research and development credits 1,033 174 Net operating losses carry forwards 12,368 11,805 Net deferred tax asset before deferred tax liabilities and valuation allowance 13,467 11,979 Valuation allowance ( 13,467 ) ( 11,979 ) Net deferred tax assets - - NOTE 9 – RELATED PARTIES A. For more information regarding warrants granted to Andrew Garrett, Inc. as placement agent and two parties associated with, including modification of terms and triggering of down round protection feature, see Note 5C3 above and Note 10 below. B. For more information regarding the intellectual property purchase agreement from the company’s CEO - See Note 4B above. C. For more information regarding the loans received from certain Stockholders - See Note 3 above. 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, is providing laboratory space, equipment and materials to support the Company sensor development activities. During the years ended December 31, 2023 and 2022, a total amount of $ 162 and $ 76 were recorded as part of the Company’s research and development expenses, respectively. For more information regarding execution of lease agreement with Tapsak Enterprises LLC dba Virginia Analytical, see Note 10B below. NOTE 10 – SUBSEQUENT EVENTS A. Exchange Agreement On February 13, 2024, the Company entered into an Exchange Agreement with certain shareholders (the “Holders”), pursuant to which the Company and the Holders agreed to replace (the “Exchange”) warrants exercisable to common shares (the “Warrants”) owned by the Holders in exchange for shares of Common Stock to be issued by the Company. On February 13, 2024, the Company closed the Exchange and issued to the Holders on February 15, 2024 an aggregate of 3,593,203 shares of Common Stock in exchange for 4,381,953 Warrants. It was also agreed that the Holders will not, during the period (“Lock-Up Period”) (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Shares, (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Shares of, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Shares or such other securities, in cash or otherwise, (iii) make any demand for or exercise any right with respect to, the registration of any Shares or any security convertible into or exercisable or exchangeable for shares of common stock, or (iv) publicly announce an intention to effect any transaction specific in clause (i), (ii) or (iii) above, provided however that the Holder, during the Lock-Up Period, may (a) sell or contract to sell Shares at a price higher than $0.50 per Share on any trading day up to 10% of the daily volume of Shares or (b) sell or contract to sell Shares at a price higher than $0.80 per Share on any trading day with no limitation on volume . The Lock-Up Period shall expire at the earliest of (i) 365 days after the date hereof or (ii) until the Shares trade above $ 1.00 per Share for five consecutive trading days. B. Lease Agreement On February 19, 2024, the Company entered into Lease Agreement (the “Agreement”) with Tapsak Enterprises LLC dba Virginia Analytical (the “Landlord”) under which it was agreed that the Company will lease from the Landlord a premises located in Front Royal, Virginia area for a monthly rental fee of $ 2.5 over a period of 3 -years commencing March 1, 2024 through March 31, 2027 (the “Initial Lease Period”). Security deposit of one month or $ 2.5 will be held by the Landlord and will be return to the Company at the end of the Initial Lease Period. In addition, the Company has an option to renew the Lease Period for another two additional periods of 3 -years each following the Initial Lease Period (the “Option Term”), following to advanced notice as defined in the Agreement. The monthly rental fee over the Option Term shall be the fair market rate determined as what is a comparable cost for similar property in the Front Royal, Virginia area. F- 26