NOTE 4 – SHAREHOLDERS’ EQUITY

Transactions:

On May 11, 2021, the Company entered into a service agreement with a non-U.S. third party for financial and project oversight services in connection with an offering. Under the agreement, the Company agreed to pay the service provider 6% of the investment amounts received, and options to receive units, each consisting of one share and one warrant exercisable at $10 per share, equal to 6% of the investment amount received divided by $10. In the event that the offering investors exercise their 2021 Warrants, the service provider is entitled to additional payments and options based on 6% of the investment and warrant exercise amounts received.

On March 10, 2026, the Company entered into a warrant amendment agreement with the holders of the existing 2021 Warrant (the “2021 Warrants Amendment”). According to the 2021 Warrants Amendment, the Company and Holders agreed to extend the warrant exercise term of the 2021 Warrants from May 11, 2026 to May 1, 2031.

The Company accounted for the 2021 Warrant Amendments as deemed dividends. The fair value of the 2021 Warrant modifications was estimated using the Black-Scholes option-pricing model and is presented within the consolidated statements of changes in shareholders equity as a credit to additional paid in capital and a debit to the accumulated deficit.

The following are the data and assumptions used: 

The Company analyzed the 2025 Warrants, including the make-whole provision, in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and concluded that the warrants do not meet the criteria for equity classification. The Company also concluded that the make-whole provision is not legally detachable and cannot be separately exercised and, therefore, is not a freestanding instrument. Accordingly, the warrants, inclusive of the make-whole provision, are accounted for as a single liability-classified instrument, initially recorded at fair value and remeasured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations until settlement or expiration.

On March 10, 2026, the Company entered into the Warrant Amendment Agreement with the investors of the 2025 Purchase Agreement, pursuant to which the term of the warrants was extended such that they expire on May 1, 2031. The Company accounted for the Warrant Amendment as deemed dividend. The fair value of the Warrant modifications was estimated using the Black-Scholes option-pricing model and is presented within the consolidated statements of changes in shareholders equity as a credit to additional paid in capital and a debit to the accumulated deficit.

On May 18, 2026, the Company completed a public offering as detailed in Note 1B. The public offering constituted a qualifying public offering event under the make-whole provision included in the 2025 Purchase Agreement. As a result, on May 18, 2026, the Company issued 22,595 additional shares of common stock in settlement of the make-whole provision. The initial fair value of the warrant liability attributable to the full amount of the offering was $299. As of December 31, 2025, only $189 of such amount was recognized, reflecting the portion attributable to the proceeds received through that date, with the remaining $110 recognized in January 2026 upon receipt of the remaining proceeds. Immediately prior to settlement, the Company remeasured the 2025 Warrants to a fair value of $513. The resulting change in fair value of $214 during the six month ended June 30, 2026, was recognized within financing expense, in the condensed consolidated interim statements of comprehensive loss.

Following settlement of the make-whole provision, the provision that had precluded equity classification was no longer applicable. The Company reassessed the classification of the remaining 2025 Warrants pursuant to ASC 480 and ASC 815 and concluded that the warrants met the criteria for equity classification. Accordingly, on May 15, 2026, the carrying amount of the remaining warrant liability of $513 was reclassified to additional paid-in capital. As of June 30, 2026, no liability remained in respect of the 2025 Warrants

Warrant liability

The fair value of warrants liability and the make-whole provision was calculated using a third-party specialist.

Prior to the occurrence of the qualifying public offering event, the calculations were based on the probability of the expected offering date, using the Black-Scholes option-pricing model and the make-whole provision was calculated using the Monte Carlo Simulation Model.

Following the completion of the public offering, the make-whole provision was measured through its settlement date based on the number of additional shares issuable pursuant to the provision and the applicable market price of the Company’s common stock. The fair value of the remaining 2025 Warrants immediately prior to their reclassification to equity was estimated using the Black-Scholes option-pricing model.

The assumptions used to perform the calculations are detailed below:

On May 14, 2026, the Company entered into the Underwriting Agreement, relating to the Offering of 1,125,000 units, with each unit consisting of one share of the Company’s common stock, par value $0.0001 (the “Shares”), and the Warrants to purchase one share of the Company’s common stock at an exercise price of $8.60 per share, exercisable for a period of five years, subject to certain adjustments and cashless exercise provisions. The combined public offering price per unit was $8.20. Under the terms of the Underwriting Agreement, the Company granted the Underwriters an option, exercisable for 45 days following the closing of the Offering, to purchase up to an additional 168,750 shares of common stock and/or Warrants to purchase 168,750 shares of common stock to cover over-allotments, if any. On May 15, 2026, the Underwriter partially exercised its over-allotment option with respect to Warrants to purchase 168,750 shares of common stock.

On May 18, 2026, the Company closed the Offering, as well as the partial exercise of the over-allotment option, and issued the Shares and Warrants, resulting in aggregate gross proceeds of approximately $9,225, before deducting underwriting discounts and commissions and offering expenses.

Underwriting fees and other direct and incremental offering costs incurred in connection with the Offering amounted to approximately $1,962 and were recorded as a reduction of additional paid-in capital. Accordingly, the net proceeds from the Offering were approximately $7,263.

Concurrently with the closing of the Offering, the Company also issued Representative’s Warrants to purchase an aggregate of up to 90,000 shares of its common stock to the Underwriters, with an exercise price of $10.25 per share. The Representative’s Warrants are exercisable beginning on November 14, 2026, and expire on November 14, 2031, pursuant to the terms and conditions of the Representative’s Warrants. The fair value of the Representative’s Warrants was accounted for as an offering cost and recorded as a reduction of additional paid-in capital.

The Company analyzed the Warrants and the Representative’s Warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity, and concluded that neither the Warrants nor the Representative’s Warrants meet the definition of a liability under ASC 480, that both instruments are indexed to the Company’s own common stock, and that both meet the conditions for equity classification set forth in ASC 815-40-25. Accordingly, the Warrants and the Representative’s Warrants were recorded as a component of additional paid-in capital upon issuance and are not subsequently remeasured.

As both the Shares and the Warrants comprising each unit are equity-classified financial instruments, no allocation of proceeds between the Shares and the Warrants was required, and the gross proceeds from the Offering were recorded in the aggregate to common stock and additional paid-in capital.