Glucotrack, Inc. 10-Q

Item 1. Financial Statements GLUCOTRACK INC. CONDENSED CONSOLIDATED BALANCE SHEETS (i n thousands of US dollars except share data) June 30, 2024 December 31, 2023 Unaudited ASSETS Current assets Cash and cash equivalents 159 4,492 Other current assets 283 376 Total current assets 442 4,868 Operating lease right-of-use asset, net (Note 3C) 71 - Property and equipment, net 86 27 Restricted cash 9 10 TOTAL ASSETS 608 4,905 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities Accounts payable 2,736 839 Notes payable (Note 3F) 12 - Operating lease liability, current (Note 3F) 25 - Other current liabilities 887 673 Total current liabilities 3,660 1,512 Non-current liabilities Loans from stockholders 191 196 Operating lease liability, non-current (Note 3F) 46 - Total liabilities 3,897 1,708 Commitments and contingent liabilities (Note 4) - Stockholders’ equity Common Stock of $ 0.001 par value (“Common Stock”): 100,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 5,478,436 and 4,178,274 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 5 4 Common Stock of $ 0.001 par value (“Common Stock”): 100,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 5,501,164 and 4,178,438 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 5 4 Additional paid-in capital 113,903 112,982 Receipts on account of shares 50 48 Accumulated other comprehensive income 22 16 Accumulated deficit ( 117,269 ) ( 109,853 ) Total stockholders’ equity (deficit) ( 3,289 ) 3,197 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) 608 4,905 The accompanying notes are an integral part of these condensed interim consolidated financial statements. 4 GLUCOTRACK INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands of US dollars except share data) (unaudited) 2024 2023 2024 2023 Six-month period ended June 30, Three-month period ended June 30, 2024 2023 2024 2023 Research and development expenses $ 5,737 $ 1,269 $ 3,589 $ 627 Marketing expenses 170 - 100 - General and administrative expenses 1,535 1,194 802 552 Total operating expenses 7,442 2,463 4,491 1,179 Operating loss 7,442 2,463 4,491 1,179 Finance income, net ( 26 ) ( 1 ) ( 2 ) ( 3 ) Net Loss 7,416 2,462 4,489 1,176 Other comprehensive income: Foreign currency translation adjustment ( 6 ) ( 11 ) - ( 6 ) $ $ Comprehensive loss for the period $ 7,410 2,451 $ 4,489 1,170 $ $ Basic and diluted net loss per common stock $ 1.42 0.66 $ 0.82 0.27 Weighted average number of common stock used in computing basic and diluted loss per common stock 5,234,765 $ 3,706,510 5,475,748 $ 4,312,294 The accompanying notes are an integral part of these condensed interim consolidated financial statements. 5 GLUCOTRACK INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands of US Dollars except share data) (unaudited) Numbers of Shares Amount Paid-in Capital account of shares Comprehensive Income Accumulated Deficit Stockholders’ Equity In thousands of US Dollars (except share data) Common Stock Additional Receipts on account Accumulated Other Total Stockholders’ Numbers of Shares Amount Paid-in Capital of shares Comprehensive Income Accumulated Deficit Equity (Deficit) Balance as of January 1, 2023 3,099,982 $ 3 $ 103,107 $ 4 $ 17 $ ( 101,901 ) $ 1,230 Loss for the period - - - - - ( 2,462 ) ( 2,462 ) Other comprehensive income - - - - 11 - 11 Stock-based compensation - - 229 - - 229 Deemed dividend resulted from trigger of down round protection feature of certain warrants granted - - 855 - - ( 855 ) - Issuance of Common Stock and pre-funded warrants upon completion of public offering, net of offering expenses 1,075,294 1 8,729 - - - 8,730 Issuance of shares as compensation to the board of directors 2,998 - (*) - 9 ( 4 ) - - 5 Balance as of June 30, 2023 4,178,274 $ 4 $ 112,929 $ - $ 28 $ ( 105,218 ) $ 7,743 Balance at April 1, 2023 3,100,562 $ 3 $ 103,168 $ 5 $ 22 $ ( 103,187 ) $ 11 Loss for the period - - - - - ( 1,176 ) ( 1,176 ) Other comprehensive income - - - - 6 - 6 Stock-based compensation - - 172 - - - 172 Deemed dividend resulted from trigger of down round protection feature of certain warrants granted - - 855 - - ( 855 ) - Issuance of Common Stock and pre-funded warrants upon completion of public offering, net of offering expenses 1,075,294 1 8,729 - - - 8,730 Issuance of restricted shares as compensation towards directors 2,418 - (*) - 5 ( 5 ) - - - Balance as of June 30, 2023 4,178,274 $ 4 $ 112,929 $ - $ 28 $ ( 105,218 ) $ 7,743 Balance as of January 1, 2024 4,178,274 $ 4 $ 112,982 $ 48 $ 16 $ ( 109,853 ) $ 3,197 Loss for the period - - - - - ( 7,416 ) ( 7,416 ) Other comprehensive income - - - - 6 - 6 Stock-based compensation - - 228 - - - 228 Issuance of restricted shares as compensation towards directors 86,861 - (*) 126 ( 48 ) - - 78 Restricted shares to be issued as compensation towards directors - - - 50 - - 50 Issuance of Common Stock upon private placement transaction (Note 3D) 79,366 - (*) 500 - - - 500 Issuance of restricted shares as payment for a previous achievement of milestone pursuant to purchase agreement (Note 4B) 20,000 - (*) - - - - - Exercise of prefunded warrants into shares (Note 3A) 395,294 - (*) - - - - - Exchange of warrants into shares (Note 3B) 718,641 1 ( 1 ) - - - - Issuance of warrants through private placement transaction (Note 3F) - - 68 - - - 68 Balance as of June 30, 2024 5,478,436 $ 5 $ 113,903 $ 50 $ 22 $ ( 117,269 ) $ ( 3,289 ) Balance as of April 1, 2024 5,351,110 $ 5 $ 113,050 $ 78 $ 22 $ ( 112,780 ) $ 375 Balance 5,351,110 $ 5 $ 113,050 $ 78 $ 22 $ ( 112,780 ) $ 375 Loss for the period - - - - - ( 4,489 ) ( 4,489 ) Stock-based compensation - - 207 - - - 207 Issuance of restricted shares as compensation towards directors 47,960 - (*) 78 ( 78 ) - - - Issuance of Common Stock upon private placement transaction (Note 3D) 79,366 - (*) 500 - - - 500 Restricted shares to be issued as compensation towards directors - - - 50 - - 50 Issuance of warrants through private placement transaction (Note 3F) - - 68 - - - 68 Balance as of June 30, 2024 5,478,436 $ 5 $ 113,903 $ 50 $ 22 $ ( 117,269 ) $ ( 3,289 ) Balance 5,478,436 $ 5 $ 113,903 $ 50 $ 22 $ ( 117,269 ) $ ( 3,289 ) (*) Represents amount lower than $1. The accompanying notes are an integral part of these condensed interim consolidated financial statements. 6 GLUCOTRACK INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of US Dollars) (Unaudited) Six-month period ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period $ ( 7,416 ) $ ( 2,462 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 12 7 Stock-based compensation 228 229 Issuance of restricted shares as compensation towards directors 128 5 Linkage difference on principal of loans from stockholders ( 5 ) 6 Changes in assets and liabilities: Other current assets 93 ( 104 ) Accounts payable 1,897 173 Other current liabilities 214 ( 121 ) Net cash used in operating activities ( 4,849 ) ( 2,267 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 71 ) - Net cash used in investing activities ( 71 ) - CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of notes and warrants through private placement transaction (Note 3F) 80 - Net proceeds received from underwritten U.S. public offering - 8,730 Proceeds received from private placement transaction (Note 3D) 500 - Net cash provided by financing activities 580 8,730 Effect of exchange rate changes on cash and cash equivalents, and restricted cash 6 ( 10 ) Change in cash and cash equivalents, and restricted cash ( 4,334 ) 6,453 Cash and cash equivalents, and restricted cash at beginning of the period 4,502 2,331 Cash and cash equivalents, and restricted cash, end of period $ 168 $ 8,784 Supplemental disclosure of cash flow activities: (a) Net cash paid during the year for: Interest $ 32 $ - (b) Non-cash investment and financing activities: Deemed dividend upon trigger of down round protection $ - $ 855 Recognition of right for usage asset against a lease liability (Note 3C) $ 79 $ - The accompanying notes are an integral part of these condensed interim consolidated financial statements. 7 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (in thousands of US Dollars, except share and per share data) 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, focused on development of an Implantable Continuous Glucose Monitor (CGM) for persons with Type 1 diabetes and insulin-dependent Type 2 diabetes (the “Glucotrack CBGM Product”). B. Liquidity and capital resources To date, the Company has not yet commercialized the Glucotrack CBGM Product. Further development and commercialization efforts are expected to require substantial additional expenditure. Therefore, the Company is dependent upon external sources for financing its operations. As of June 30, 2024, the Company has incurred accumulated deficit of $ 117,269 . Furthermore, the Company has generated operating losses and negative operating cash flow for all reported periods. As of June 30, 2024, the balance of cash and cash equivalents amounted to $ 159 together with additional amounts raised subsequent to the balance sheet date amounted to $ 4,360 thousand are insufficient for the Company to realize its business plans for the twelve-month period subsequent to the reporting period. During the year ended December 31, 2023, the Company raised net proceeds of $ 8,730 through completion of underwritten public offering. In addition, during the period of six month ended June 30, 2024, the Company entered into (i) exchange agreement with certain shareholders under which warrants with down round protection feature have been exchanged into shares of common stock in order to facilitate its equity structure (see also Note 3B), (ii) private placement agreement under which the Company raised proceeds of $ 500 (see also Note 3D) and (iii) note and warrant agreement under which the Company raised proceeds of $ 80 (see also Note 3F). In addition, subsequent to the balance sheet date, the Company entered into (i) convertible promissory notes under which the Company raised gross proceeds of $ 360 (see also Note 5A) and (ii) convertible promissory notes and warrants agreement under which the Company raised gross proceeds of $ 4,000 (see also Note 5B). The Company plans to finance its operations through the sale of equity and/or debt securities. 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. 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. The condensed interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 8 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (in thousands of US Dollars) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Presentation The accompanying unaudited condensed interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2023, as was filed with the Securities and Exchange Commission (“SEC”) on March 28, 2024. The unaudited condensed interim consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company’s financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature. The results for the period of three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period or for any future period. B. Use of Estimates in the Preparation of Financial Statements The preparation of the condensed interim 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. C. Principles of Consolidation The condensed interim consolidated financial statements include the accounts of the Company and its subsidiary. Significant intercompany balances and transactions have been eliminated in consolidation. D. Cash and Cash Equivalents Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired. E. 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. 9 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (in thousands of US Dollars) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) F. Warrants Certain warrants that were issued to several holders are classified as a component of permanent equity since they are freestanding financial instruments that are legally detachable and separately exercisable, do not embody an obligation for the Company to repurchase its own shares, and permit the holders to receive a fixed number of Ordinary Shares upon exercise for a fixed exercise price and thus, are considered as indexed to the Company’s own shares. As such warrants were issued together with financial instruments that are not subsequently measured at fair value and the warrants were measured based on allocation of the proceeds received by the Company in accordance with the relative fair value basis. When applicable, direct issuance expenses that were allocated to certain warrants were deducted from additional paid-in capital. G. Leases The Company applies ASC Topic 842, “Leases” (“ASC 842”) under which the Company determines if an arrangement is a lease at inception. The Company’s assessment is based on: (i) whether the contract involves the use of an identified asset, (ii) whether the Company obtains the right to substantially all of the economic benefits from the use of the asset throughout the period of use, and (iii) whether the Company has the right to direct the use of the asset. Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or (v) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of lease term. A lease is classified as an operating lease if it does not meet any one of these criteria. Since all the Company’s lease contracts for premises do not meet any of the criteria above, the Company concluded that all its lease contracts should be classified as operating leases. Right of Use (“ROU”) assets and liabilities are recognized on the commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company uses its Incremental Borrowing Rate (“IBR”) based on the information available on the commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Moreover, the ROU asset may also include initial direct costs, which are incremental costs of a lease that would not have been incurred if the lease had not been obtained. The Company uses the long-lived assets impairment guidance in ASC 360-10, “Property, Plant, and Equipment - Overall”, to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize. Certain leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate is considered unless it is reasonably certain that the Company will not exercise the option. 10 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (in thousands of US Dollars) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) G. 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 by the weighted average number of shares of Common Stock outstanding and shares of Common Stock to be issued upon achievement of performance milestone during the period and upon exercise of pre-funded warrants. 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 to 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 result of the exercise or conversion of these instruments was anti-dilutive. The net loss and the weighted average number of shares of Common Stock used in computing basic and diluted net loss per Common Stock for the period of six and three month ended June 30, 2024 and 2023, is as follows: SCHEDULE OF ANTIDILUTIVE NET LOSS AND WEIGHTED AVERAGE US dollars (except share data) US dollars (except share data) Six-month period ended June 30, Three-month period ended June 30, (Unaudited) (Unaudited) 2024 2023 2024 2023 Numerator: Net loss $ 7,416 $ 2,462 $ 4,489 $ 1,176 Deemed dividend related to trigger of down round protection feature - 855 - 855 Net loss attributable to common stockholders $ 7,416 $ 3,317 $ 4,489 $ 2,031 Denominator: Shares of Common Stock used in computing basic and diluted net loss per common stock 5,226,975 3,544,000 5,460,081 3,987,275 Shares of Common Stock to be issued upon exercise of pre-funded warrants - 162,510 - 325,019 Shares of Common Stock to be issued upon achievement of second performance milestone 7,790 - 15,667 - Weighted average number of Common Stock outstanding used in computing basic and diluted net loss per share 5,234,765 3,706,510 5,475,748 4,312,294 Basic and diluted net loss per common stock $ 1.42 $ 0.89 $ 0.82 $ 0.47 11 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.) (in thousands of US Dollars) NOTE 3 - SIGNIFICANT TRANSACTIONS A. Exercise of pre-funded warrants On January 3, 2024, a number of 395,294 pre-funded warrants granted through underwritten public offering in April 2023 have been fully exercised into the same number of shares of Common Stock of the Company. B. Exchange Agreement On February 13, 2024, the Company entered into an Exchange Agreement with certain warrant holders (the “Holders”), pursuant to which the Company and the Holders agreed to exchange (the “Exchange”) warrants with down round protection feature exercisable to common shares (the “Warrants”) owned by the Holders 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 718,641 shares of Common Stock in exchange for 876,391 Warrants (the “Shares”). 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 traded above $ 1.00 per Share for five consecutive trading days. The Company accounted for the Exchange of the aforesaid warrants with shares as deemed dividend which was calculated at the closing date by the management using the assistance of external appraiser as the excess of fair value of the share to be issued after taking into consideration a discount for lack of marketability at a rate of 16.81% over the Lock-Up Period over the fair value of the original equity instrument (i.e. warrants which included down round protection feature). However, since the fair value of the new equity instrument was estimated as lesser than the fair value of the replaced equity instrument, deemed dividend was not recorded. C. 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 February 28, 2027 (the “Initial Lease Period”). Security deposit of $ 2.5 which represents payment of one month is held by the Landlord which will be return to the Company at the end of the Initial Lease Period. In addition, the Company has an option to renew the Initial Lease Period for another two additional periods of 3-years each following the Initial Lease Period (the “Option Term”), following 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 Front Royal, Virginia area. 12 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.) (in thousands of US Dollars) NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.) C. Lease Agreement (Cont.) In accordance with the provision of ASC 842, Leases, at the commencement date of the Agreement, the Company recognized the right to usage asset equals to lease liability in total amount of $ 79 . The lease liability was measured at the present value of the future lease payments, which are discounted based on an estimate of the additional interest rate that the Company would be required to pay in order to borrow a similar amount for a similar period in order to obtain a similar amount on the date of first recognition of the lease. As part of the leasing period, the Company considered only the Initial Lease Period as the realization of the option to extend the period was not considered as reasonably certain. Operating lease: SCHEDULE OF OPERATING LEASE June 30, 2024 Operating right of use asset $ 71 Current operating lease liability $ 25 Non-Current operating lease liability $ 46 Maturity analysis of the Company’s lease liability: SCHEDULE OF MATURITY ANALYSIS OF LEASE LIABILITY June 30, 2024 Less than one year $ 30 Between 1-2 years 30 More than 2 years 20 Total operating lease payments $ 80 Less: imputed interest $ ( 9 ) Present value of lease liabilities $ 71 Additional information on lease The following is a summary of weighted average remaining lease terms and discount rate for Company’s leases: SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATE June 30, 2024 Lease term (years) 2.92 Weighted average discount rate 9.03 % D. Private Placement Agreement On April 22, 2024, the Company entered into a private placement agreement under which the Company issued 79,366 shares of its common stock at a price of $ 6.3 per share for aggregate gross proceeds of $ 500 (the “Offering”). The Offering included participation of certain members of the Company’s executive management, Board of Directors and existing shareholders. 13 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.) (in thousands of US Dollars) NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.) E. Adoption of 2024 Equity Incentive Plan and Reverse Share Split On April 26, 2024, the Company held its Annual Meeting of Shareholders (the “Annual Meeting”) under which the Company’s stockholders approved, inter alia, the following proposals: (i) adoption of the Company’s 2024 Equity Incentive Plan and (ii) an amendment to Article IV of the Company’s Certificate of Incorporation, to effect a reverse stock split of the Company’s Common Stock at a ratio of between one-for-five and one-for-thirty, with such ratio to be determined at the sole discretion of the Board of Directors. Following the Annual Meeting, on April 30, 2024, the Company’s Board of Directors approved a one-for-five reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). On May 17, 2024, the Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware which effected the Reverse Stock Split. For accounting purposes, all shares, options and warrants to purchase shares of common stock and loss per share amounts have been adjusted to give retroactive effect to the Reverse Share Split for all periods presented in these interim consolidated financial statements. Any fractional shares resulting from the Reverse Share Split were rounded up to the nearest whole share. F. Note and Warrant Purchase Agreements On June 27, 2024, the Board of Directors approved the Company to enter into note and warrant purchase agreements with certain officers, directors and existing investors, providing for the private placement of unsecured promissory notes in the aggregate principal amount of $ 100 (the “Notes”) and warrants to purchase up to an aggregate of 300,000 shares of the Company’s Common Stock (the “Warrants”). The Notes bear simple interest at the rate of 3% per annum and are due and payable in cash on the earlier of: (i) twelve months from the date of the Note; or (ii) the date the Company raises third-party equity capital in an amount equal to or in excess of $1,000 (the “Maturity Date”). The Company may prepay the Notes at any time prior to the Maturity Date without penalty. If an event of default occurs, the then-outstanding principal amount of the Notes plus any unpaid accrued interest will accelerate and become immediately payable in cash. Each Warrant has an exercise price of $ 4.95 per share and immediately exercisable and have a five-year term. Such Warrant was determined as eligible for equity classification. At the initial date, the total proceeds received of $ 80 were allocated to the Notes and the Warrants based on their relative fair value of the identified components (i.e. Notes and Warrants) as determined by the Company’s management as follows: SCHEDULE OF FAIR VALUE OF THE IDENTIFIED COMPONENTS Fair value at Closing Date Notes (1) $ 12 Warrants (2) 68 Fair value at Closing Date $ 80 (1) The fair value of the Notes was determined based on rating model using a discount rate of 12 % which represented the Company’s applicable rate of risk, as determined by management. (2) The fair value of the Warrants determined by management based on Black-Scholes pricing model taking into account expected stock price volatility of 245 % and risk-free interest rate of 4.52 %. The Note is accounted for as a financial liability measured at amortized cost. At subsequent dates, the Company recognized a discount expense over the economic life of the Notes based on the effective interest rate method. However, during the period of six month, discount expense were de minimis. 14 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.) (in thousands of US Dollars) NOTE 4 - COMMITMENTS AND CONTINGENT LIABILITIES A. On March 4, 2004, the Israeli Innovation Authority (IIA) provided Integrity Israel with a grant of approximately $ 93 (NIS 420,000 ), 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 June 30, 2024, 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 200,000 shares of 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 200,000 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 as defined in the Agreement 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 at the acquisition date, is expensed immediately. At the Closing Date, it was determined that the asset acquisition represents 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. In 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 the fulfilment of the first performance milestone the Company was committed to issue 20,000 restricted shares to the Seller. Accordingly, the Company recorded an amount of $ 131 as research and development expenses with a similar amount as an increase to additional paid-in capital. The first performance milestone shares were issued on February 6, 2024. 15 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.) (in thousands of US Dollars) NOTE 4 - COMMITMENTS AND CONTINGENT LIABILITIES (Cont.) B. (Cont.) In May 2024, the Company achieved the second 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 result, the Company is committed to issue 30,000 restricted shares to the Seller. Accordingly, the Company recorded stock-based compensation expenses amounted to $ 192 which representing the quoted price of its Common Stock at the Closing Date, after taking into consideration a discount for lack of marketability in a rate of 30 % over the applicable restriction period. As of June 30, 2024, the second performance milestone shares were not yet issued. As of June 30, 2024, achievement of all other remaining performance milestones was not considered probable and thus no stock-based compensation expenses were recorded with respect to thereof. NOTE 5 - SUBSEQUENT EVENTS A. On July 18, 2024, the Company entered into a series of convertible promissory notes with three directors, and one member of the Company’s executive management, providing for the private placement of unsecured convertible promissory notes in the aggregate principal amount of $ 360 (the “Notes” and each a “Note”). The Notes bear simple interest at the rate of 8 % per annum and are due and payable in cash on the earlier of: (i) 12-months anniversary of Note, or (ii) the date of closing of a Qualified Financing (as defined below) (the “Maturity Date”). Except regarding conversion of the Notes as discussed below, the Company may not prepay the Notes without the written consent of the holder. If not sooner repaid, all outstanding principal and accrued but unpaid interest on the Notes (the “Note Balance”), as of the close of business on the day immediately preceding the date of the closing of the next issuance and sale of capital stock of the Company, in a single transaction or series of related transactions, to investors resulting in gross proceeds to the Company of at least $ 500 (excluding indebtedness converted in such financing) (a “Qualified Financing”), will automatically be converted into that number of shares of equity securities of the Company sold in the Qualified Financing equal to the number of shares calculated by dividing (X) the Note Balance by (Y) an amount equal to the price per share or other unit of equity securities issued in such Qualified Financing, and otherwise on the same terms as the security issued in the Qualified Financing, provided that the conversion price per share shall not be lower than $ 1.56 . Upon the occurrence of an Event of Default (as defined below), a holder may, by written notice to the Company, declare the Note to be due immediately and payable with respect to the Note Balance. An “Event of Default” means (i) failure by the Company to pay the Note Balance on the Maturity Date, (ii) voluntary bankruptcy, or (iii) involuntary bankruptcy. Upon the occurrence of an Event of Default specified in clause (iii) above, the Note Balance shall automatically and immediately become due and payable, in all cases without any action on the part of the holder. 16 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.) (in thousands of US Dollars) NOTE 5 - SUBSEQUENT EVENTS (Cont.) B. On July 30, 2024, the Company entered into a convertible promissory note and three warrant agreements (the “Warrants”) with an existing investor (the “Holder”), providing for the private placement of a secured convertible promissory note in the aggregate principal amount of $ 4,000 (the “Note”). The Note is not convertible until and unless approved at a meeting of the Company’s stockholders (the “Stockholder Approval”). The Company has agreed to hold such a meeting to seek Stockholder Approval within 90 days. The Note bears simple interest at the rate of 8 % per annum and is due and payable in cash on the earlier of: (i) 12 months anniversary of Note, or (ii) the date of closing of a Sale Transaction (defined below) (the “Maturity Date”) . The Note is secured by a first-priority security interest on all Company assets. Except with regard to conversion of the Note a or a Sale Transaction as discussed below, the Company may not prepay the Note without the written consent of the Holder. If Stockholder Approval is obtained, the Note (i) is convertible at the discretion of the Holder at a price equal to the closing price of the Common Stock on the date of conversion and, (ii) if the Closing Price of the Common stock exceeds $ 5.00 per share for a period of 5 consecutive trading days, will automatically convert at a price equal to the 5 daily Volume Weighted Average Price (“VWAP”) of the Common Stock (subject to adjustment for any stock split, stock dividend, reverse stock split, combination or similar transaction). In the event of a Sale Transaction on or prior to the Maturity Date, the Company will repay the Holder, at the Holder’s election, as follows: (i) cash equal to 200% of the Note balance, or (ii) transaction consideration in the amount to be received by the Holder in such Sale Transaction if the Note was converted pursuant to an optional conversion. “Sale Transaction” means a merger or consolidation of the Company with or into any other entity, or a sale of all or substantially all of the assets of the Company, or any other transaction or series of related transactions in which the Company’s stockholders immediately prior to such transaction(s) receive cash, securities or other property in exchange for their shares and, immediately after such transaction(s), own less than 50% of the equity securities of the surviving corporation or its parent . Upon the occurrence of an Event of Default (defined below), a Holder may, by written notice to the Company, declare the Note to be due immediately and payable with respect to the Note balance. An “Event of Default” means (i) failure by the Company to pay the Note balance on the Maturity Date, (ii) the Company becomes subject to a judgement of more than $ 50,000 , (iii) voluntary bankruptcy, or (iv) involuntary bankruptcy. Upon the occurrence of an Event of Default specified in clause (iii) above, the Note balance shall automatically and immediately become due and payable, in all cases without any action on the part of the Holder. Each Warrant becomes exercisable 12 months after its issuance and has term of 10 years. The Warrants are exercisable for cash only and have no price-based antidilution. The first Warrant is for 2,133,334 shares at $ 1.875 per share. The second Warrant is for 1,523,810 shares at $ 2.625 per share. The third Warrant is for 1,185,186 shares at $ 3.375 per share. 17