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SIGNIFICANT TRANSACTIONS

9 Months Ended

Sep. 30, 2024

NOTE 3 - SIGNIFICANT TRANSACTIONS

A.	Exercise of pre-funded warrants

On January 3, 2024, 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 15, 2024, 718,641 shares of Common Stock have been issued 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, 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 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 volume limitation.

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 (common shares) 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.

In accordance with the provision of ASC 842, Leases, at the commencement date of the Agreement, the Company recognized the right to use 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 incremental interest rate that the Company would be required to pay to borrow a similar amount for a similar period in order to obtain a similar amount on the initial recognition date 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.

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)

(in thousands of US Dollars)

NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.)

C.	Lease Agreement (Cont.)

Operating lease:

	September 30, 2024

Operating right-of-use asset	$	65
Current operating lease liability	$	25
Non-Current operating lease liability	$	40

Maturity analysis of the Company’s lease liability:

	September 30, 2024

Less than one year	$	30
Between 1-2 years		30
More than 2 years		13

Total operating lease payments	$	73

Less: imputed interest	$	8

Present value of lease liabilities	$	65

Additional information on lease

The following is a summary of the weighted average remaining lease terms and discount rate for the lease:

	September 30, 2024
Lease term (years)		2.42
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 $6.30 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.

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.

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)

(in thousands of US Dollars)

NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.)

F.	Note and Warrant Purchase Agreements

On June 27, 2024, the Company entered into note and warrant purchase agreements (the “Purchase Agreement”) with certain investors (the “June 27 Investors”), providing for the private placement of unsecured promissory notes in the aggregate principal amount of $100 (the “June 27 Notes” and each a “June 27 Note”) and warrants to purchase up to an aggregate of 300,000 shares of the Company’s Common Stock (the “June 27 Warrants”).

The June 27 Notes bear simple interest at a rate of 3% per annum and are due and payable in cash on the earlier of: (a) 12 months from the date of the June 27 Note; or (b) 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 June 27 Notes at any time prior to the Maturity Date without penalty. If an event of default occurs, the then-outstanding principal amount of the June 27 Notes plus any unpaid accrued interest will accelerate and become immediately payable in cash.

Each of June 27 Warrants has an exercise price of $4.95 per share. The June 27 Warrants are immediately exercisable and have a 5-year term.

Upon initial recognition, the management allocated the gross cash proceeds received based on the relative fair value of the June 27 Notes and the detachable June 27 Warrants in total amount of $15 and $85, respectively. The fair value of the June 27 Note was determined based on a rating model using a debt discount rate of 28.65% which represented the Company’s applicable rate of risk. The fair value of the June 27 Warrants was determined by using Black-Scholes pricing model taking into account, inter alia, expected stock price volatility of 245% and risk-free interest rate of 4.52%. The amount allocated to June 27 Warrants was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock upon exercise for a fixed exercise price).

The June 27 Notes are accounted for as a financial liability measured at amortized cost. In subsequent periods, the Company recognized a discount and interest expense over the economic life of the June 27 Notes based on the effective interest rate method.

The following tabular presentation reflects the reconciliation of the carrying amount of the June 27 Notes during the period of nine months ended September 30, 2024:

	Nine-month period ended September 30, 2024
	(Unaudited)
Open balance	$	-
Total proceeds received		100
Total proceeds allocated to June 27 Warrants at initial recognition		(85	)
Discount amortization and interest expenses related to June 27 Notes (Note 5 below)		16
Partial conversion June 27 Notes and accrued Interest (Note 3I and Note 3J below)		(26	)
Ending balance	$	5

During the period commencing the issuance date through September 30, 2024, none of the June 27 Warrants have been exercised.

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)

(in thousands of US Dollars)

NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.)

G.	Convertible Promissory Notes

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 (the “July 18 Investors”), providing for the private placement of unsecured convertible promissory notes in the aggregate principal amount of $360 (the “July 18 Notes” and each a “July 18 Note”).

The July 18 Notes bear simple interest at a rate of 8% per annum. Interest on the outstanding principal will accrue and, unless converted earlier as set forth below, be due and payable on (i) the 12-month anniversary of the date hereof, or (ii) the closing date of a Qualified Financing, as defined herein (the “Maturity Date”).

Except regarding the conversion of the July 18 Notes as discussed below, the Company may not prepay the July 18 Notes without the written consent of the July 18 Investors. If not sooner repaid, all outstanding principal and accrued but unpaid interest on the July 18 Notes (the “July 18 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 July 18 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), each July 18 Investors may, by written notice to the Company, declare the July 18 Note to be due immediately and payable with respect to the July 18 Note Balance. An “Event of Default” means (i) failure by the Company to pay the July 18 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 July 18 Note Balance shall automatically and immediately become due and payable, in all cases without any action on the part of any July 18 Investors.

Upon initial date, the management measured the fair value of the embedded conversion feature which is accounted for as embedded derivative liability. The difference between the total gross cash proceeds received and the fair value of the embedded conversion feature is allocated to July 18 Notes that are measured at amortized cost under which in subsequent periods the Company recognizes a discount expense over the economic life of the July 18 Notes based on the effective interest rate method. However, the fair value of the embedded derivative liability related to the conversion feature was determined by the management at an insignificant amount since upon closing of a Qualified Financing the conversion will be done based on market conditions (i.e. conversion price will be equal to the fair value of the share upon conversion) and thus all proceeds received of $360 were allocated to the July 18 Notes.

The following tabular presentation reflects the reconciliation of the carrying amount of the July 18 Notes during the period of nine months ended September 30, 2024:

	Nine-month period ended September 30, 2024
	(Unaudited)

Open balance	$	-
Total proceeds allocated to July 18 Notes at initial recognition		360
Interest expenses related to July 18 Notes (Note 5 below)		5
Partial conversion July 18 Notes and accrued Interest (Note 3J below)		(101	)
Ending balance	$	264

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)

(in thousands of US Dollars)

NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.)

H.	Convertible Promissory Note and Warrant Agreements

On July 30, 2024, the Company entered into a convertible promissory note and three warrant agreements (the “July 30 Warrants”) with an existing investor (the “July 30 Holder”), providing for the private placement of a secured convertible promissory note in the aggregate principal amount of $4,000 (the “July 30 Note”). The July 30 Note is not convertible until and unless approved at a meeting of the Company’s stockholders (the “Stockholder Approval”).

The July 30 Note bears simple interest at a rate of 8% per annum and is due and payable in cash on earlier of: (i) 12 months anniversary of July 30 Note, or (ii) closing date of a Sale Transaction (defined below) (the “Maturity Date”). The July 30 Note is secured by a first-priority security interest on all Company’s assets.

Except regarding the conversion of the July 30 Note or a Sale Transaction as discussed below, the Company may not prepay the July 30 Note without the written consent of the July 30 Holder. If Stockholder Approval is obtained, the July 30 Note (i) is convertible at the discretion of the July 30 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).

Upon Sale Transaction on or prior to the Maturity Date, the Company will repay the July 30 Holder, at the July 30 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 July 30 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 Company’s assets, 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), the July 30 Holder may, by written notice to the Company, declare the Note to be due immediately and payable with respect to the July 30 Note balance. An “Event of Default” means (i) failure by the Company to pay the July 30 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 July 30 Note balance shall automatically and immediately become due and payable, in all cases without any action on the part of the July 30 Holder.

Each July 30 Warrant becomes exercisable 12 months after its issuance and has term of 10 years. The July 30 Warrants are exercisable for cash only and have no price-based antidilution. The first July 30 Warrant is for 2,133,334 shares at $1.875 per share. The second July 30 Warrant is for 1,523,810 shares at $2.625 per share. The third July 30 Warrant is for 1,185,186 shares at $3.375 per share.

At the initial date, the Company has issued two instruments that include (i) a financial instrument that is considered as “host” which comprised of July 30 Note and two embedded derivative financial instruments (i.e. an embedded conversion feature and an embedded redemption feature to receive cash equals to 200% of July 30 Note balance upon Sale Transaction) and (ii) three series of detachable warrants. At the initial date, the Company is required to estimate the fair value of both two instruments and allocate the total gross proceeds received between them based on that relative fair value identified. The fair value of the embedded derivative financial instruments (i.e. the conversion right and the redemption right) should be bifurcated from the host instrument and remeasured on recurring basis at each reporting period under marked to market approach, the July 30 Note is accounted for under carrying amount whereby discount and interest expenses are recorded over the economic life of the July 30 Note based on the effective interest rate method and the July 30 Warrants are classified into equity without any further subsequent measurement.

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)

(in thousands of US Dollars)

NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.)

Convertible Promissory Note and Warrant Agreements (Cont.)

Upon initial recognition, the management by using the assistance of an external appraiser allocated the gross cash proceeds received based on the relative fair value of the July 30 Note and the detachable July 30 Warrants in total amount of $1,450 and $2,550, respectively. The fair value of the convertible note was determined by using hybrid method that includes conversion scenario and liquidation scenario taking into account, inter alia, a debt discount rate of 28.65%. The fair value of the July 30 Warrants was determined by using Black-Scholes pricing model taking into account, inter alia, expected stock price volatility of 122.8% and risk-free interest rate of 4.78%. The amount allocated to July 30 Warrants was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock upon exercise for a fixed exercise price).

Furthermore, it was determined that the embedded conversion feature and embedded redemption feature are required to be bifurcated from the host loan instrument. The fair value of the bifurcated derivatives was determined by the management using the assistance of an external appraiser in a total amount of $35 upon initial recognition and in subsequent periods as derivative liability at fair value through profit and loss. The remaining amount of $1,415 was allocated to the host loan instrument which in subsequent periods is accounted for using the effective interest method over the term of the loan, until its stated maturity.

The following tabular presentation reflects the reconciliation of the carrying amount of the July 30 Note during the period of nine months ended September 30, 2024:

	Nine-month period ended September 30, 2024
	(Unaudited)

Open balance	$	-
Total proceeds received		4,000
Total proceeds allocated to July 30 Warrants at initial recognition		(2,550	)
Total proceeds allocated to embedded redemption feature at initial recognition		(35	)
Amortization of discount and interest expenses related to July 30 Note (Note 5 below)		309
Ending balance	$	1,724

The following tabular presentation reflects the reconciliation of the fair value of the embedded conversion feature and embedded redemption feature during the period of nine months ended September 30, 2024:

	Nine-month period ended September 30, 2024
	(Unaudited)

Open balance	$	-
Proceeds allocated to embedded redemption feature at initial recognition		35
Revaluation expenses related to embedded redemption feature (Note 5 below)		2
Ending balance	$	37

On September 24, 2024, the Company held a special meeting of its stockholders under which shares of common stock issuable by the Company upon conversion of the July 30 Note and exercise of the July 30 Warrants has been approved. However, through September 30, 2024, July 30 Holder has not elected to trigger the conversion of July 30 Note or the exercise of the July 30 Warrants into shares of common stock.

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)

(in thousands of US Dollars)

NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.)

August 23 Conversion

On August 23, 2024 (the “Commitment Date”), the Company and two of June 27 Investors entered into conversion agreement, under which the Company agreed to convert the principal nominal amount plus any accrued but unpaid interest pursuant to each of June 27 Notes, totalling approximately $20 each (the “Debt”), held by the Investors to Common Stock at a conversion price of $1.02 per share. On October 15, 2024, the Company issued 19,682 shares of common stock for each of the two of the June 27 Investors in respect of each respective Debt converted.

In satisfaction of the Debt, the Company also issued to each of the two June 27 Investors three warrants (each an “August 23 Warrant”). Each August 23 Warrant becomes exercisable on August 16, 2025 and has term of 10 years. The August 23 Warrants are exercisable for cash only and have no price-based antidilution. The first August 23 Warrant is for 10,707 shares of Common Stock and is exercisable at $1.875 per share. The second August 23 Warrant is for 7,648 shares of Common Stock, exercisable at $2.625 per share. The third August 23 Warrant is for 5,948 shares of Common Stock, exercisable at $3.375 per share.

The above transaction was accounted for as settlements of financial liabilities under which the instruments issued or to be issued to the June 27 Investors (i.e. shares of common stock and August 23 Warrants) are eligible for equity classification and thus both have been recorded as part of the permanent equity based on the total fair value of $238 at the Commitment Date. The difference between the fair value of these equity instruments and the carrying amount of each of the respective Debt at the Commitment Date amounted to $11 was charged immediately to the finance expenses (see also Note 5 below).

During the period commencing the issuance date through September 30, 2024, none of the August 23 Warrants have been exercised.

Sep 5 Conversion

On September 5, 2024 (the “Commitment Date”), the Company and one of June 27 Investors and July 18 Investors entered into a conversion agreement, under which the Company agreed to convert outstanding board fees amounted $113 and the principal nominal amount plus any accrued but unpaid interest pursuant to June 27 Note and July 18 Note, totalling $146 (referring together as a “Debt”), held by the Investor to Common Stock at a conversion price of $1.02 per share. On October 15, 2024, the Company issued 254,226 shares of common stock for the June 27 Investor in respect of the Debt converted.

In satisfaction of the Debt, the Company also issued to June 27 Investor and July 18 Investor three warrants (each an “September 5 Warrant”). Each September 5 Warrant becomes exercisable on August 16, 2025 and has term of 10 years. The September 5 Warrants are exercisable for cash only and have no price-based antidilution. The first September 5 Warrant is for 138,299 shares of Common Stock and is exercisable at $1.875 per share. The second September 5 Warrant is for 98,785 shares of Common Stock, exercisable at $2.625 per share. The third September 5 Warrant is for 76,833 shares of Common Stock, exercisable at $3.375 per share.

The above transaction was accounted for as settlements of financial liabilities under which the instruments issued or to be issued to the July 18 Investor (i.e. shares of common stock and September 5 Warrants) are eligible for equity classification and thus both have been recorded as part of permanent equity based on the total fair value of $1,505 at the Commitment Date. The difference between the fair value of these equity instruments and the carrying amount of the Debt at the Commitment Date amounted to $227 was charged immediately to the finance expenses (see also Note 5 below).

During the period commencing the issuance date through September 30, 2024, none of the September 5 Warrants have been exercised.

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)

(in thousands of US Dollars)