NOTE 1 – GENERAL

The Company’s revenues were derived from:

In the six months ended June 30, 2026, and June 30, 2025, most of the Company’s revenues were derived from the sales of Mudra Band and Mudra Link to B2C customers.

Following the attack by Hamas on Israel’s southern border, Hezbollah, a terrorist organization in Lebanon, has also launched missile, rocket, and shooting attacks against Israeli military sites, troops, and Israeli towns in northern Israel. In response to these attacks, the Israeli army has carried out a number of targeted strikes on sites belonging to Hezbollah in southern Lebanon, and in October 2024, the Israeli military initiated a ground operation in Lebanon, primarily near the Israel-Lebanon border.

In June 2025, in light of continued nuclear threats and intelligence assessments indicating imminent attacks, Israel launched a preemptive strike directly targeting military and nuclear infrastructure inside Iran aimed to disrupt Iran’s capacity to coordinate or launch further hostilities against Israel, as well as disrupt its nuclear program. In addition, during the two-week fighting with Iran in June 2025, Israel closed its airspace and ceased all port activity related to commercial shipments. In light of continued nuclear and missiles threats and intelligence assessments indicating imminent attacks, on February 28, 2026, the United States and Israel launched a preemptive strike directly targeting military and nuclear infrastructure inside Iran aimed to disrupt Iran’s capacity to coordinate or launch further hostilities activities, as well as disrupt its nuclear and missiles programs. In addition, since March 2, 2026, Israel has been engaged with Hezbollah in Lebanon, that has been launching missile, rocket, and shooting attacks against Israeli military sites, troops, and Israeli towns. In response to these attacks, Israel has carried out a number of targeted strikes on sites associated with Hezbollah in Lebanon. As of August 24, 2026, the situation remains highly fluid, and the Company is unable to predict when, or on what terms, this escalation will be resolved.

Further, many Israeli citizens are obligated to perform several days, and in some cases, more, of annual military reserve duty each year until they reach the age of 40 (or older for certain reservists) and, in the event of a military conflict, may be called to active duty. As of August 24, 2026, these events have no material impact on the Company’s operations.

On October 24, 2023, the Company received a written notification from the Listing Qualifications Department of the Nasdaq Stock Market LLC regarding its noncompliance with Nasdaq’s minimum bid price requirement because the closing bid price of the Ordinary Shares was below $1.00 per ordinary share for the previous 30 consecutive business days. The Company was granted 180 calendar days, or until April 22, 2024, to regain compliance with the minimum bid requirement. Since the Company did not regain compliance with the minimum bid price requirement by April 22, 2024, it applied for an additional 180-calendar day grace period. On April 23, 2024, Nasdaq granted the Company an additional 180-day compliance period, or until October 21, 2024, to regain compliance with Nasdaq’s minimum bid price rule. On October 10, 2024, the October Reverse Split at the ratio of 1:20 became effective. As a result, the Company was informed by Nasdaq on October 28, 2024, that the Company had regained compliance.

The Company’s stockholders’ equity was approximately $1.7 million as of June 30, 2024. On January 16, 2025, the Company received a written notification from Nasdaq, which stated that the Company was no longer in compliance with the minimum stockholders’ equity requirement for continued listing on Nasdaq, due to the Company’s failure to maintain a minimum of $2.5 million in stockholders’ equity.

In accordance with Nasdaq rules, on February 5, 2025, the Company submitted a plan to regain compliance. On April 4, 2025, the Company received a letter notifying that the Company has regained compliance with listing Nasdaq Rule 5550(b)(1), and the matter was subsequently closed.

Liquidity and Resources:

The accompanying interim condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of August 24, 2026, the Company is still at its development stage and at an early stage of generating revenues. Therefore, the Company has suffered recurring losses from operations and negative cash flows from operations since inception. In September 2022, the Company completed an initial public offering (the “IPO”) in the United States whereby it listed it Ordinary Shares on Nasdaq and raised net proceeds of $13.3 million. In November 2023, the Company completed a secondary offering and raised net proceeds of $1.7 million.

In June 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”). During 2024, the Company issued 34,131 Ordinary Shares pursuant to SEPA for net proceeds of $4.4 million. In June 2024, the Company received an initial pre-paid advance of $2 million in connection with the execution of SEPA, which was fully repaid until February 2025.

In November 2024, the Company completed a registered direct offering and raised net proceeds of $1.58 million.

During 2025, the Company completed several subsequent equity offerings with Armistice Capital, LLC (the “Shareholder”) that resulted in aggregate net proceeds of approximately $20.5 million, as detailed within note 4.

Further, starting from September 2025 the Company entered into a sales agreement with a sales agent (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agent, Ordinary Shares through an at-the-market (“ATM”) equity offering program. During 2025, the Company raised net proceeds of approximately $1.2 million, before deducting offering expenses under the ATM program.

In April 2026, the Company entered into a warrant inducement transaction pursuant to which certain outstanding warrants were exercised for cash. The Company received aggregate gross proceeds of approximately $5.02 million and net proceeds of approximately $4.56 million. For additional information, see Note 4 – Shareholders’ Equity.

As of June 30, 2026, the Company had incurred accumulated losses of $42.7 million and expects to continue to fund its operations through fundings, such as issuances of convertible securities, Ordinary Shares and warrants and through Israeli governmental grants. There is no assurance that such financing will be obtained. The Company’s board of directors (see also Note 5.b.) and management believe that its cash will be sufficient for at least one year from the date of the approval of these financial statements.

NOTE 2 – BASIS FOR PREPARATION

The Company’s accompanying condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America
(“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnote disclosures required by U.S. GAAP for complete financial statements.

These condensed interim financial statements should be read in conjunction with the Company’s annual consolidated financial statements and related notes for the year ended December 31, 2025 (the “Annual Financial Statements”).

There have been no changes in the Company’s significant accounting policies during the six months ended June 30, 2026, as compared to the critical accounting policies described in note 2 to the Annual Financial Statements.

NOTE 3 – RELATED PARTIES

The employment expenses of the Company’s co-founders: Asher Dahan (the current Chairman of the Board of Directors (the “Board”) and the Chief Executive Officer (“CEO”) of the Company), Guy Wagner (President and Chief Scientific Officer of the Company) and Leeor Langer (the Chief Technology Officer of the Company), for the six months ended June 30, 2026 and 2025 amounted to $326 thousand and $109 thousand, respectively.

The share-based payment expenses for the six months ended June 30, 2026 and 2025 were $340 thousand and $159 thousand, respectively, relating to awards granted to the Company’s co-founders.

NOTE 4 – EQUITY

The warrants were exercisable immediately upon issuance, at an exercise price of $2,880 per Ordinary Share and are exercisable until September 12, 2027. On September 16, 2022, 56 warrants were exercised into 56 Ordinary Shares. On December 14, 2022, the exercise price of the warrants was adjusted to $1,440 per Ordinary Share.

The warrants issued pursuant to the concurrent private placement have an exercise price of $90.00 per Ordinary Share, are immediately exercisable and expire five years following the date of issuance. The Company received gross proceeds of approximately $1.85 million, before deducting underwriting discounts and commissions and before offering expenses ($1.58 million net proceeds after deducting underwriting discounts and commissions and other expenses).

In connection with the Offering, the Company also agreed to amend existing warrants that were previously issued on November 27, 2024 to the investor participating in the Offering to purchase up to 22,833 Ordinary Shares of the Company, with an exercise price of $90 per share. Such existing warrants have been amended to reduce the exercise price to $36 per share and now expire five years following the closing of the Offering.

The issuance of the warrants in the concurrent private placement was subject to the approval of the Company’s shareholders which was obtained on February 19, 2026. Such warrants will have an exercise price of $24.03 per Ordinary Share, are immediately exercisable, and will expire five years from the date of approval by the Company’s shareholders.

In addition, in connection with the October 29, 2025 transaction, the Company agreed to adjust the exercise price of the warrants issued in the registered direct offerings completed on September 12, 2025 and September 15, 2025 to $24.03 per Ordinary Share. Such exercise price adjustments, including the revised expiration date of five years from the date of approval by the Company’s shareholders, were subject to the approval of the Company’s shareholders which was obtained on February 19, 2026.

In April 2026, the Company entered into a warrant inducement agreement with the Shareholder, pursuant to which the Shareholder agreed to exercise for cash all of the outstanding warrants issued in connection with the Company’s September 12, 2025, September 15, 2025, October 29, 2025 and November 29, 2025 transactions, at an exercise price of $5.19 per Ordinary Share, for aggregate gross proceeds of approximately $5.02 million to the Company ($4.56 million net proceeds). In consideration for such exercise, the Company agreed to issue to the Shareholder new warrants to purchase up to an aggregate of 1,694,291 Ordinary Shares. The new warrants have an exercise price of $4.53 per Ordinary Share, are immediately exercisable and expire five years following the date of issuance.

The incremental change in fair value of the change in exercise price of previously issued warrants was accounted for as an equity issuance cost in the amount of approximately $1,099 thousand, which was recorded to additional paid-in capital. The Company uses the Black-Scholes option pricing model to determine the incremental fair value of the warrants taking into consideration the following assumptions: expected volatility of 60%, dividend yield 0%, risk free interest rate of 3.86% and expected life of 5 years (4.8 years for the warrants before modification).

b. Share-based compensation:

The reported sale prices of Company’s Ordinary Shares and warrants on Nasdaq were $2.59 and $11.20, respectively, as of August 21, 2026.

b.2 Options to employees:

During the six month period ended June 30, 2026, the Company granted 6,111 new options to purchase Ordinary Shares.

b.3 Options to consultants:

b.4 RSUs to employees and consultants:

In August 2024, the Board approved the Company’s 2024 Global Equity Incentive Plan (the “Incentive Plan”), which provides for the issuance of up to 6,348 Ordinary Shares of the Company. On December 20, 2024, the Board approved an increase of the number of Ordinary Shares reserved under the Incentive Plan to 15,721.

The Incentive Plan provides for the grant of options, shares, restricted shares or RSUs to employees, non-employee directors, consultants, advisors, or service providers of the Company, as well as employees, non-employee directors, consultants, advisors, or service providers of any affiliate of the Company.

On September 9, 2025, the Board approved an additional increase of Ordinary Shares reserved under the Incentive Plan. Following such approval, the number of Ordinary Shares reserved under the Incentive Plan increased to 88,361.

On November 27, 2025, the Board approved an additional increase in the number of Ordinary Shares, reserved for issuance under the Incentive Plan by 186,512 from 88,361 to 274,873.

On February 19, 2026, the Board approved an additional increase in the number of Ordinary Shares reserved for issuance under the Incentive Plan by 159,079 from 274,873 to 433,952.

On December 25, 2024, the Board approved the grant of 14,597 RSUs to employees and consultants, which will automatically result in the issuance of Ordinary Shares over a vesting period of between 12 months to 24 months, with the vesting starting on January 1, 2025. Any unvested RSUs will expire upon the termination of employment or service. The fair value of each RSU as of the grant date was $64.08, and total expenses of $934 thousand are being expensed over the RSUs vesting periods.

On September 10, 2025, the Board approved the grant of 56,250 RSUs to employees and consultants, which will automatically result in the issuance of Ordinary Shares over a vesting period of between 12 months to 36 months, with the vesting starting on September 10, 2025. Any unvested RSUs will expire upon the termination of employment or service. The fair value of each RSU as of the grant date was $11.34, and total expenses of $1.12 million are being expensed over the RSUs vesting periods.

On December 23, 2025, the Board approved the grant of 197,056 RSUs to employees, directors and consultants, which will automatically result in the issuance of Ordinary Shares over a vesting period of 36 months, with the vesting starting on January 1, 2026. Any unvested RSUs will expire upon the termination of employment or service. The fair value of each RSU as of the grant date was $16.65, and total expenses of $3.3 million are being expensed over the RSUs vesting periods. Of the total RSUs granted, 63,333 RSUs were subject to the approval of the Company’s shareholders at a shareholders’ meeting, which was held on February 19, 2026 and approved this grant. The fair value of such RSUs, was determined based on the market price of the Company’s Ordinary Shares on the date of shareholder approval, which differed from the fair value of the RSUs as approved by the Board on December 23, 2025.

During the six month period ended June 30, 2026, the Company issued 40,092 Ordinary Shares upon the settlement of vested RSUs and did not grant any new RSUs to purchase Ordinary Shares.

NOTE 5 – SUBSEQUENT EVENTS

On August 7, 2026, the Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with the New Shareholders to resolve the matters raised in the Demand Letter and the Court Proceedings and certain other matters relating to the composition of the Board. Pursuant to the Cooperation Agreement, the New Shareholders irrevocably withdrew the Demand Letter and any related materials, demands or notices submitted to the Company in connection therewith and ceased all efforts in furtherance of the demand to convene the special general meeting and any related solicitation. In connection with the Cooperation Agreement, Ilana Lurie and Guy Wagner resigned from the Board and Avichay Vardi, Oz Adler, Gabriel Kabazo and Hila Kiron Revach were appointed to the Board, resulting in a seven-member Board.