NanoVibronix Inc

Current report

We were organized as a Delaware corporation in October 2003. On February 14, 2025, we completed the Merger pursuant to the Merger Agreement, as further described below. Following the consummation of the Merger, NanoVibronix will conduct its operations through its two wholly-owned subsidiaries: (i) NanoVibronix Ltd., a private company incorporated under the laws of the State of Israel (“Nano OpCo”) and (ii) ENvue Medical Holdings LLC, a Delaware limited liability company (together with its respective subsidiaries, “ENvue”). Nano OpCo focuses on non-invasive biological response-activating devices that target biofilm prevention, pain therapy, and wound healing and can be administered at home, without the assistance of medical professionals. ENvue is a medical device company engaged in the research, development, production, marketing, and sale of medical devices in the field of enteral feeding and are in the initial stage of commercializing our products.

Current report

Recent Developments

Current report

Underwritten Public Offering, Series G Convertible Preferred Stock

Current report

On May 16, 2025, we announced the closing of an underwritten public offering (the “2025 Underwritten Offering”) of 400,000 shares of the Company’s Series G Convertible Preferred Stock (“Series G Preferred Stock”), with a par value $0.001 per share and a stated value equal to $25, and warrants to purchase up to 4,901,982 shares of common stock, par value $0.001 per share at an exercise price of $2.04 per share (the “May 2025 Warrants”). The combined public offering price of each share of Preferred Stock together with an accompanying Warrant was $25.00. The May 2025 Warrants have a term of five years from the initial issuance date and are exercisable immediately upon issuance. The Company also issued to Dawson James Securities, Inc. warrants (the “May 2025 Representative’s Warrants”) to purchase up to 245,099 shares of common stock, which such May 2025 Representative’s Warrants have substantially the same terms as the May 2025 Warrants except that the May 2025 Representative’s Warrants expire five years from the date of commencement of sales in the 2025 Underwritten Offering.

Current report

On May 15, 2025, prior to the closing of the 2025 Underwritten Offering, we filed the Certificate of Preferences, Rights and Limitations of the Series G Convertible Preferred Stock (the “Series G Certificate of Designations”) with the Secretary of State of the State of Delaware, which became effective upon filing. Pursuant to the terms of the Series G Certificate of Designations, the holders of the Series G Preferred Stock are entitled to receive cumulative dividends at the rate per share of 9% per annum of the stated value per share until the fifth anniversary of the date of issuance of the Series G Preferred Stock, which such dividends may be paid, at our option, in up to an aggregate of 2,205,883 shares of common stock.

Current report

The gross proceeds of the 2025 Underwritten Offering were approximately $10 million before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Current report

Certificate of Amendment to Series X Certificate of Designations, Series X Amendment Agreement

Current report

On May 12, 2025, we entered into an Amendment Agreement (the “Series X Amendment Agreement”) with the Requisite Series X Holders (as defined in the Certificate of Designations of the Series X Non-Voting Convertible Preferred Stock (the Series X Certificate of Designations”)). Pursuant to the Series X Amendment Agreement, the Requisite Series X Holders agreed to amend the Series X Certificate of Designations by filing a Certificate of Amendment (“Series X Certificate of Amendment”) to the Series X Certificate of Designations with the Secretary of State of the State of Delaware to (i) increase the number of authorized shares of Series X Preferred Stock (as defined below) from 57,720 shares to 62,220 shares and (ii) upon the closing of this offering, to reduce the conversion price of the Series X Preferred Stock to the conversion price of the Preferred Stock as such conversion price shall be set forth in the Certificate of Designations of the Preferences, Rights and Limitations of the Series G Convertible Preferred Stock.

Current report

On May 12, 2025, we filed the Series X Certificate of Amendment with the Secretary of State of the State of Delaware, thereby amending the Series X Certificate of Designations. The Series X Certificate of Amendment became effective with the Secretary of State of the State of Delaware upon filing.

Current report

April 2025 Promissory Note and Guaranty

Current report

On April 11, 2025, ENvue issued a promissory note (the “April Note”) to Alpha Capital Anstalt (the “Lender”) in the principal amount of $360,000 (the “April Note Principal Amount”), together with all accrued interest thereon. The April Note has a maturity date of June 11, 2025 (the “April Note Maturity Date”) and on the April Note Maturity Date, the aggregate unpaid April Note Principal Amount, all accrued and unpaid interest and all other amounts payable under the April Note shall be due and payable. The April Note bears interest at an annual rate equal to 8.0% and is payable “in kind” by adding such accrued interest to the April Note Principal Amount.

Current report

Pursuant to the terms of the April Note, commencing on the date of the issuance and sale of any shares common stock or Common Stock Equivalents (as defined in the April Note) by us, the Lender may require ENvue to redeem all or a portion of the April Note with the proceeds of such issuance and sale (the “Redemption Right”). The Redemption Right may be redeemed at any time after date of such issuance and sale by the Lender providing to ENvue written notice specifying the principal amount of the Note to be redeemed (the “Redemption Amount”), and the Redemption Amount shall be due and payable by ENvue on the second business day after the date of such notice.

Current report

The April Note additionally provides for certain customary events of default which upon occurrence, the Lender may, at its option, declare the entire April Note Principal Amount together with all accrued interest and all other amounts payable under the April Note immediately due and payable, provided however, that if a bankruptcy event occurs, the April Note Principal Amount and accrued interest on the April Note shall become immediately due and payable without any notice, declaration or other act on the part of the Lender.

Current report

In connection with ENvue’s issuance of the April Note, on April 11, 2025, we entered into that certain Guaranty (the “Guaranty”) in favor of the Lender, pursuant to which we have agreed to guarantee to the Lender the payment of all obligations and liabilities of ENvue under the April Note, including, without limitation, for principal, interest and any other amounts due and payable by ENvue under the April Note (the “Guaranteed Obligations”). Upon the occurrence of an Event of Default (as defined in the April Note), the Guaranteed Obligations shall be deemed immediately due and payable at the election of Lender and we shall pay on demand the Guaranteed Obligations to Lender.

Current report

March 2025 Reverse Stock Split

Current report

On March 12, 2025, we filed a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-11 reverse stock split of the shares of our common stock, par value $0.001 per share, either issued and outstanding or held by us as treasury stock, effective as of 4:05 p.m. (Delaware time) on March 13, 2025 (the “2025 Reverse Stock Split”). All common stock share and per share amounts in this Quarterly Report have been adjusted to give effect to the 2025 Reverse Stock Split unless otherwise stated.

Current report

Agreement and Plan of Merger

Current report

On February 14, 2025, pursuant to the terms of that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of February 14, 2025, by and among us, NVEH Merger Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“First Merger Sub”), NVEH Merger Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Second Merger Sub”), and ENvue Medical Holdings, Corp. (“Predecessor ENvue” or “ENvue”), the Company and Predecessor ENvue effected (i) a merger of First Merger Sub with and into Predecessor ENvue, with the First Merger Sub ceasing to exist and Predecessor ENvue becoming a wholly-owned subsidiary the Company and (ii) the merger of Predecessor ENvue with and into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Merger”), with Second Merger Sub being the surviving entity of the Second Merger (“Surviving Entity”). At the effective time of the Second Merger, the certificate of formation of the Surviving Entity was amended and restated to, among other things, to change the name of the Surviving Entity to “ENvue Medical Holdings LLC.” In connection with the Merger Agreement, we issued (i) 33,182 shares of common stock (the “Merger Shares”), which such number of shares represented no more than 4.9% (the “Exchange Cap”) of the outstanding shares of common stock as of immediately before the First Effective Time and (ii) Pre-Funded Warrants to purchase up to 124,408 shares of our common stock (the “Merger Pre-Funded Warrants”) at an exercise price of $0.0001 per share, and (iii) 57,720 shares of Series X Non-Voting Convertible Preferred Stock (the “Series X Preferred Stock”) in excess of the Exchange Cap to the holders of Predecessor ENvue in consideration for 100% of Predecessor ENvue. Each share of Series X Preferred Stock will be convertible into 90,9091 shares of our common stock, subject to and contingent upon the affirmative vote of a majority of the shares of common stock present or represented and entitled to vote at a meeting of stockholders of Company to approve, for purposes of the Nasdaq Listing Rules, the issuance of shares of our common stock to the stockholders of Predecessor ENvue upon conversion of any and all shares of Series X Preferred Stock in accordance with the terms of the Certificate of Designation for the Series X Non-Voting Convertible Preferred Stock.

Current report

The Merger was consummated and completed on February 14, 2025.

Current report

After giving effect to the Merger, pursuant to the terms and conditions of the Merger Agreement: (i) the holders of the outstanding equity of Predecessor ENvue immediately prior to the effective time of the First Merger (“First Effective Time”) own 19.9% of the common stock of the Company and 85.0% of the outstanding equity of the Company (assuming the Series X Preferred Stock is converting at a ratio of 1,000:1) immediately following the First Effective Time, which following stockholder approval will allow the Series X Preferred Stock to convert to common stock of the Company which may result in the holders of Predecessor ENvue to own 85% of the common stock of the Company, and (ii) the holders of our outstanding equity immediately prior to the First Effective Time own 80.1% of the common stock of the Company and 15.0% of the outstanding equity of the Company (assuming the Series X Preferred Stock is converting at a ratio of 1,000:1) immediately following the First Effective Time, which following stockholder approval which will allow the Series X Preferred Stock to convert to common stock of the Company which may result in our holders owning 15% of common stock of the Company.

Current report

February 2025 Private Placement

Current report

On February 13, 2025, we entered into a Securities Purchase Agreement (the “PIPE Purchase Agreement”) with an institutional investor (the “Investor”), pursuant to which we sold in a private placement senior convertible debenture (the “Debenture”) due the earlier of (i) the date that is the 30-day anniversary of the effective date of stockholder approval of the issuance of the shares of common stock upon the conversion of the debentures and (ii) November 13, 2025 (the date that is nine months following the date of issuance of the Debenture) (“Maturity Date”), having an aggregate principal amount (the “Principal Amount”) of $500,000 (the “Debenture Transaction”). The closing of the Debenture Transaction occurred on February 14, 2025.

Current report

On March 26, 2025, we amended and restated the Debenture (the “A&R Debenture”) to increase the Principal Amount to $1,300,000 to provide for the funding by the Investor to our subsidiary ENvue Medical Holdings LLC (“ENvue”), a wholly owned subsidiary of (i) an aggregate of $250,000 by the Investor to ENvue on February 6, 2025, (ii) an aggregate of $250,000 by the Investor to ENvue on March 4, 2025, and (iii) and an aggregate of $300,000 by the Investor to ENvue on March 26, 2025.

Current report

On the Maturity Date, we shall pay the Investor in cash or, at the option of the Investor, in the form of conversion shares, or a combination thereof, the entire outstanding Principal Amount of the A&R Debenture, together with accrued and unpaid interest thereon, the applicable exit fee and any other amounts due thereunder. Following the receipt of Debenture Stockholder Approval, the A&R Debenture shall be convertible, in whole or in part, into shares of common stock, at the option of the Investor, at the initial conversion price of $4.8906 (the “Conversion Price”), which is subject to customary anti-dilution adjustments, and which such Conversion Price shall not be lower than the floor price of $0.97812. The A&R Debenture bears interest at the rate of 8.0% per annum, payable on the Maturity Date.

Current report

The issuance of the Debenture and the A&R Debenture was made in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder for transactions not involving a public offering.

Current report

ENvue Consolidated Secured Note

Current report

On January 17, 2025, ENvue issued a Consolidated Secured Note, (as amended, the “ENvue Note”) to Alpha Capital Anstalt in the aggregate principal amount of $2,497,308, which such note was funded in several tranches. The ENvue Note does not bear interest and is secured by Collateral (as defined in the ENvue Note). The aggregate principal amount owed under the ENvue Note shall be due and payable on the earlier of (i) the receipt of shareholder approval by us. of the Parent Stockholder Matters (as defined in that certain Merger Agreement) and (ii) December 31, 2025.

Current report

January 2025 3(a)(9) Exchange

Current report

On January 7, 2025, we entered into a securities exchange agreement (the “Exchange Agreement”) with a certain institutional investor pursuant to which we agreed to issue an aggregate of (i) 41,498 shares of common stock (the “3(a)(9) Shares”), (ii) a warrant to purchase up to 158,562 shares of common stock (the “January 2025 Warrant”), and (iii) a pre-funded warrant to purchase up to 178,132 shares of common stock (the “January 2025 Pre-Funded Warrant”), in exchange for the Series A-1 Warrant held by the Holder to purchase up to 264,271 shares of common stock at an exercise price of $16.17 per share (the “Exchange”). We cancelled the Series A-1 Warrant reacquired in the Exchange and the Series A-1 Warrant will not be reissued. The January 2025 Warrant has substantially the same terms as the Series A-1 Warrant, except that the shares of common stock issuable upon exercise of the January 2025 Warrant were subject to stockholder approval pursuant to the applicable rules and regulations of the Nasdaq (which such stockholder approval was obtained on February 24, 2025, at a special meeting of stockholders), is exercisable for a term of five and one half years from the date such stockholder approval is received and deemed effective under Delaware law, and has an exercise price of $6.8296 per share.

Current report

Subsequent to the Exchange, the holder of the January 2025 Pre-Funded Warrant (i) exercised the January 2025 Pre-Funded Warrant in full on a cashless basis for an aggregate of 228,354 shares of common stock and (ii) exercised the January 2025 Warrant in full on a cashless basis for an aggregate of 91,507 shares of common stock.

Current report

The issuance in the Exchange of the 3(a)(9) Shares, the January 2025 Warrant, the January 2025 Pre-Funded Warrant and the shares of common stock issuable upon the exercise thereof pursuant to the Exchange Agreement was made in reliance on an exemption from registration under Section 3(a)(9) of the Securities Act.

Current report

Nasdaq Minimum Stockholder’s Bid Price Requirement and Minimum Stockholder’s Equity Requirement

Current report

On November 19, 2024, we received an additional deficiency notice from the Staff indicating that we no longer satisfied the $2.5 million stockholders’ equity requirement set forth in Nasdaq Listing Rule 5550(b)(1) (the “Equity Rule”) for continued listing on Nasdaq. The Staff indicated that our non-compliance with the Equity Rule would be considered by the Panel at the Hearing and could serve as an additional basis for delisting of our securities from Nasdaq.

Current report

On December 26, 2024, we received a decision letter (the “Decision Letter”) from the Panel granting a limited extension of time for us to demonstrate compliance with the Bid Price Rule and the Equity Rule for continued listing on Nasdaq, subject to the following conditions: (i) on or before February 27, 2025, we will have obtained stockholder approval to effect a reverse stock split; (ii) on or before March 31, 2025, we shall have effected a reverse stock split and, thereafter, maintain a $1.00 closing bid price of our common stock for a minimum of ten consecutive trading days; (iii) on or before March 31, 2025, we are required to demonstrate compliance with the Equity Rule by filing public disclosure with the SEC and demonstrate long-term compliance with the Equity Rule; and (iv) on or before March 31, 2025, we are required to demonstrate compliance with all continued listing requirements for Nasdaq. On February 24, 2025, we obtained approval from our stockholders to file a certificate of amendment to our Certificate of Incorporation to effectuate the Reverse Stock Split, among others, and on March 13, 2025, the Reverse Stock Split became effective.

Current report

On April 9, 2025, we received a letter (the “April Letter”) from the Staff notifying us that we had demonstrated compliance with the Bid Price Rule and the Equity Rule as required by the Panel pursuant to the Decision Letter.

Current report

Pursuant to the April Letter, we will be subject to a mandatory panel monitor for a period of one year from the date of the April Letter. If, within that one-year monitoring period, Staff finds us again out of compliance with the Equity Rule that was subject of the exception, notwithstanding Rule 5810(c)(2), we will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and Staff will not be permitted to grant additional time for us to regain compliance with respect to that deficiency, nor will the company be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3). Instead, Staff will issue a Delist Determination Letter and we will have an opportunity to request a new hearing with the Panel or a newly convened Hearings Panel if the initial Panel is unavailable.

Current report

Critical Accounting Policies and Significant Estimates

Current report

This management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates if conditions differ from our assumptions. While our significant accounting policies are more fully described in Note 3 – Summary of Significant Accounting Policies in the “Notes to Financial Statements”, we believe the following accounting policies are critical to the process of making significant estimates in preparation of our financial statements.

Current report

Inventory

Current report

Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Cost is determined using the “first-in, first-out” method.

Previous report

Cautionary Note Regarding Forward-Looking Statements

Previous report

This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment, and regulations. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

Previous report

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and financial performance, you should carefully review the risks and uncertainties described under the heading “Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2023, and those described from time to time in our future reports filed with the SEC. Moreover, new risks regularly emerge and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business, or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this Quarterly Report on Form 10-Q. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Previous report

We are a medical device company focusing on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals. Our WoundShield, PainShield and UroShield products are backed by novel technology which relates to ultrasound delivery through surface acoustic waves.

Previous report

Compliance with Nasdaq Continued Listing Rules

Previous report

Pursuant to the Letter, in order to regain compliance with Nasdaq’s minimum bid price requirement, the Company’s Common Stock was required to maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period. In the event that the Company did not regain compliance by the end of the Compliance Period, the Company may have been eligible for additional time to regain compliance. To qualify, the Company was required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and was required to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If the Company met these requirements, the Company may have been eligible for an additional 180 calendar days to regain compliance.

Previous report

The Company did not regain compliance with the Rule by October 7, 2024, and on October 8, 2024, Nasdaq notified the Company that the Company was not eligible for an additional 180 day compliance period because the Company does not comply with the $5,000,000 minimum stockholders’ equity initial listing requirement for The Nasdaq Capital Market, and accordingly, the Company’s securities were subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company subsequently timely requested a hearing before the Panel, which has stayed any further action by Nasdaq at least pending completion of the hearing and the expiration of any extension that may be granted by the Panel. The hearing is scheduled to be held on December 5, 2024. If the Company is delisted from Nasdaq, among other things, it will increase the difficulty in the Company’s ability to raise money through the sale of its securities.

Previous report

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the nine months ended September 30, 2024, the Company’s cash used in operations was $1,968,000 leaving a cash balance of $1,305,000 as of September 30, 2024. Because the Company does not have sufficient resources to fund its operations for the next twelve months from the date of this filing, management has substantial doubt about the Company’s ability to continue as a going concern.

Previous report

Protrade Proceeding

Previous report

On February 26, 2021, Protrade Systems, Inc. (“Protrade”) filed a Request for Arbitration (the “Request”) with the International Court of Arbitration (the “ICA”) of the International Chamber of Commerce alleging that we were in breach of the Exclusive Distribution Agreement. Protrade alleges, in part, that we breached the Exclusive Distribution Agreement by discontinuing the manufacture of the DV0057 Painshield MD device in favor of an updated 10-100-001 Painshield MD device. Protrade claims damages estimated at $3 million.

Previous report

On March 15, 2022, the arbitrator issued a final award, which, determined that (i) we had the right to terminate the Exclusive Distribution Agreement; (ii) we did not breach the duty of good faith and fair dealing with regard to the Exclusive Distribution Agreement; and (iii) we did not breach any confidentiality obligations to Protrade. Nevertheless, the arbitrator determined that we did not comply with the obligation to supply Protrade with a year’s supply of patches and awarded Protrade $1,500,250, which consists of $1,432,000 for “lost profits” and $68,250 as reimbursement of arbitration costs, on the grounds that we allegedly failed to supply Protrade with certain patches utilized by users of DV0057 Painshield MD device. The arbitrator based the decision on the testimony of Protrade’s president who asserted that a user would use in excess of 33 patches per each device. We believe that the number of patches per device alleged by Protrade is grossly inflated and that these claims were not properly raised before the arbitrator. Accordingly, on April 13, 2022, we submitted an application for the correction of the award which the arbitrator denied on June 22, 2022.

Previous report

On April 5, 2022, Protrade filed a Petition with the Supreme Court of New York, Nassau County seeking to confirm the award. On April 13, 2022, we submitted an application to the ICA seeking to correct an error in the award based on the evidence that we only sold 2-3 reusable patches per device contrary to the 33 reusable patches claimed by Protrade. The same arbitrator who issued the award denied the application.

Previous report

On July 22, 2022, we filed a cross-motion seeking to vacate arbitration award on the grounds that the arbitrator exceeded her authority, that the award was procured by fraud, and that the arbitrator failed to follow procedures established by New York law. In particular, we averred in our motion that Protrade’s witness made false statements in arbitration and that the arbitrator resolved a claim that was never raised by Protrade and that has no factual basis.

Previous report

On October 3, 2022, the court issued a decision granting Protrade its petition to confirm the award and denying the cross-motion.

Previous report

On November 9, 2022, we filed a motion to re-argue and renew its cross-motion to vacate the arbitration decision based on newer information that was not available during the initial hearing. On the same day, we also filed a notice of appeal with the Appellate Division, Second Department. On March 21, 2023, the court denied the motion to re-argue and renew.

Previous report

On July 10, 2023, we filed an appeal with the Appellate Division, Second Department. We intend to continue to vigorously pursue our opposition to the award in all appropriate fora.

Previous report

As of September 30, 2024 and December 31, 2023, the Company accrued the amount of the arbitration award to Protrade of approximately $2.1 million for both periods including interest which is classified in “Other accounts payable and accrued expenses.”

Previous report

Critical Accounting Estimates

Previous report

Our financial statements have been prepared in accordance with U.S. GAAP. The preparation of the consolidated financial statements requires us to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are more fully described in both (i) “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) Note 3 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2023. There have not been any material changes to such critical accounting policies since December 31, 2023.

Previous report

The currency of the primary economic environment in which our operations are conducted is the U.S. dollar (“$” or “dollar”). Accordingly, our functional currency is the dollar.

Previous report

Gross Profit. For the three months ended September 30, 2024 and 2023, gross profit was approximately $133,000 and $349,000, respectively, a decrease of approximately 62%, or $216,000, between the periods. The decrease in gross profit was mainly due to decrease in the sales of devices which have higher gross margins, and to a lesser extent the write-off of obsolete inventory.

Previous report

Research and Development Expenses. For the three months ended September 30, 2024 and 2023, research and development expenses were approximately $249,000 and $33,000, respectively, an increase of approximately 655%, or $216,000, between the periods. The increase was mainly due to product redevelopment costs that began during 2024.

Previous report

Research and development expenses as a percentage of total revenues were approximately 66% and 7% for the three months ended September 30, 2024 and 2023, respectively. This increase was due to higher expenses incurred in 2024 compared to revenue.

Previous report

Our research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, stock-based compensation expenses, expenses related to subcontracting, patents application and registration, and clinical trial and facilities expenses associated with and allocated to research and development activities.

Previous report

Selling and marketing expenses as a percentage of total revenues were approximately 48% and 41% for the three months ended September 30, 2024 and 2023, respectively.

Previous report

General and Administrative Expenses. For the three months ended September 30, 2024 and 2023, general and administrative expenses were approximately $673,000 and $796,000, respectively, a decrease of approximately 15%, or $123,000, between the periods. The decrease was primarily due to a decrease in legal fees related to securities and litigation matters, as well as accounting fees incurred in 2024, as compared to 2023.

Previous report

General and administrative expenses as a percentage of total revenues were approximately 179% and 174% for the three months ended September 30, 2024 and 2023, respectively.

Previous report

*Financial expense, net.*For the three months ended September 30, 2024 and 2023, financial expenses, net was approximately $9,000 and $(19,000), respectively, an increase of approximately $28,000 between the periods mainly due to the gain/loss related to the termination of the investment in Sanuwave and interest payments received.

Previous report

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Previous report

Research and development expenses as a percentage of total revenues were relatively steady totaling approximately 26% and 11% for the nine months ended September 30, 2024 and 2023, respectively.

Previous report

Selling and Marketing Expenses. For the nine months ended September 30, 2024 and 2023, selling and marketing expenses were approximately $545,000 and $631,000, respectively, a decrease of approximately 14%, or $86,000, between the periods. The decrease was due to consulting fees and costs incurred during the nine months ended September 30, 2023, related to the website development project which was completed in 2023.

Previous report

Selling and marketing expenses as a percentage of total revenues were relatively steady totaling approximately 26% and 57% for the nine months ended September 30, 2024 and 2023, respectively.

Previous report

General and Administrative Expenses. For the nine months ended September 30, 2024 and 2023, general and administrative expenses were approximately $2,335,000 and $2,780,000, respectively, a decrease of approximately 16%, or $445,000, between the periods. The decrease was mainly due to a decrease of legal fees related to securities and litigation matters, as well as accounting fees incurred during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

Previous report

General and administrative expenses as a percentage of total revenues were approximately 110% and 251% for the nine months ended September 30, 2024 and 2023, respectively.

Previous report

*Financial expense, net.*For the nine months ended September 30, 2024 and 2023, financial expenses, net was approximately $54,000 compared to $(44,000), respectively, an increase of approximately $90,000 between the periods mainly due to the termination of the investment in Sanuwave and interest payments received.

Previous report

Interest expense. For the nine months ended September 30, 2024 and 2023, interest expense was $101,000 and $102,000, respectively. This pertains to the interest on the Company’s judgment liability for the first nine months of 2024.

Previous report

General

Previous report

As of September 30, 2024, we do not have a commitment to fund our product redevelopment project for approximately another $1.2 million over the next four quarters as well as the $2 million owed to Protrade as of September 30, 2024, under the court decision, which we continue to appeal.

Previous report

Off-Balance Sheet Commitments and Arrangements

Previous report

Cash Flows

Previous report — wording carried elsewhere

Revenues. For the three months ended September 30, 2024 and 2023, our revenues were approximately $376,000 and $458,000, respectively, a decrease of approximately 18%, or $82,000, between the periods. The decrease was mainly attributable to decrease of revenues received from customers from Veteran Administration facilities or through workman’s compensation programs, referred to us from three sales representatives to whom we sold our products directly due to our lowering of certain wholesale prices to these representatives during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. Our revenues may fluctuate as we add new customers or when existing distributors make large purchases of our products during one period and no purchases during another period. Our revenues by quarter may not be linear or consistent. We do not anticipate that our revenues will be impacted by inflation or changing prices in the foreseeable future.

Previous report — wording carried elsewhere

For the three months ended September 30, 2024, the percentage of revenues attributable to our products was: PainShield Plus – 35%, PainShield MD – 17%, Euroshield clips – 2%, Painshield Plus Monthly Kits – 26% and Painshield MD Monthly Kits – 20%. For the three months ended September 30, 2023, the percentage of revenues attributable to our products was: PainShield Plus – 53%, PainShield MD – 44% and UroShield – 3% .

Previous report — wording carried elsewhere

Gross profit as a percentage of revenues was approximately 58% and 72% for the nine months ended September 30, 2024 and 2023, respectively. The decrease in gross profit as a percentage resulted primarily from the reasons described above.

Previous report — wording carried elsewhere

Selling and marketing expenses consist mainly of payroll expenses to direct sales and marketing employees, stock-based compensation expenses, travel expenses, conventions, advertising and marketing expenses, rent and facilities expenses associated with and allocated to selling and marketing activities.

Previous report — wording carried elsewhere

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, stock-based compensation expenses, accounting, legal and facilities expenses associated with general and administrative activities and costs associated with being a publicly traded company.

Previous report — wording carried elsewhere

Income tax expenses. For the nine months ended September 30, 2024 and 2023, tax expenses were $14,000 and $18,000, respectively. The tax expense is computed by multiplying income before taxes at our Israeli subsidiary by the appropriate tax rate.

Previous report — wording carried elsewhere

Net loss. Our net loss decreased by approximately $625,000, or 22%, to approximately $2,273,000 for the nine months ended September 30, 2024 from approximately $2,898,000 in the same period of 2023. The decrease in net loss resulted primarily from the factors described above.

Previous report — wording carried elsewhere

We will need to continue to raise additional capital to finance our losses and negative cash flows from operations and may continue to be dependent on additional capital raising as long as our products do not reach commercial profitability. If we are unable to raise additional capital, we will need to adjust our business plan and reduce workforce, which could have a material adverse effect on the Company and its financial position.