UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 20212022

OR

[  ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-36445

NanoVibronix, Inc

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (914)233-3004

(Former name, former address and

former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant has been required to submit and post such files). Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] ☐ No [X] ☒

The number of shares outstanding of the registrant’s Common Stock as of May 15, 202116, 2022 was 24,109,63527,997,793 shares.

NanoVibronix, Inc.

Quarter Ended March 31, 20212022

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NanoVibronix, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(Amounts in thousands except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements

NanoVibronix, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(Amounts in thousands except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements

NanoVibronix, Inc.

Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)

(Amounts in thousands except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements

NanoVibronix, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Amounts in thousands except share and per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements

NanoVibronix, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(Amounts in thousands except share and per share data)

NOTE 1 – DESCRIPTION OF BUSINESS

NanoVibronix, Inc. (the “Company”), a Delaware corporation, commenced operations on October 20, 2003 and is 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.

The Company’s principal research and development activities are conducted in Israel through its wholly owned subsidiary, NanoVibronix (Israel 2003) Ltd., a company registered in Israel, which commenced operations in October 2003.

NOTE 2 – LIQUIDITY AND PLAN OF OPERATIONS

The Company’s ability to continue to operate is dependent mainly on its ability to successfully market and sell its products and the receipt of additional financing until profitability is achieved. The Company currently incurs and historically has incurred losses from operations and expects to do so in the foreseeable future. The Company has historically had recurring losses and negative cash used from operations which raised substantial doubt about the Company’s ability to continue as a going concern at that time. During the first quarter of 2021,2022, the Company used $954 ofhas incurred losses as well as negative cash in operations. Although we expectoutflows from operating activities and expects to continue to incuroccur losses and negative cash flowsoutflows from operating activities we had a cash balances of $7,978 as of March 31, 2021. Becausethrough fiscal year 2022. The Company’s management believes that the Company has sufficient resourcescapital to fund our operation forexecute its business plan over the next twelve months. If the Company is unable to successfully commercialize its products over the next twelve months, from the date of this filing, the substantial doubt has been alleviated. The Companyit may need to continue to raise additional capital to finance its losses and negative cash flows from operations beyond the next twelve months and may continue to be dependent on additional capital raising as long as our products do not reach commercial profitability. If weat a later time. There are unable to increase in the number of authorized shares of our common stock, we will be unable to issue common stock or convertible instruments. As a result,no assurances that the Company willwould be limited in its abilityable to raise additional capital.capital, if required, on terms favorable to it. If the Company is unsuccessful in commercializing its products and raising capital, it will need to reduce activities, curtail, or cease operations.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for the interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. The unaudited consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date.

The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The terms “we,” “us,” “our,” and the “Company” refer to NanoVibronix, Inc. and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

Unaudited interim financial information

In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position and results of operations of the Company. These consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020,2021, as found in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2021.2022, as amended on May 2, 2022

The balance sheet for December 31, 20202021 was derived from the Company’s audited financial statements for the year ended December 31, 2020.2021. The results of operations for the periods presented are not necessarily indicative of results that could be expected for the entire fiscal year due to seasonality and other factors. Certain information and footnote disclosures normally included in the consolidated financial statements in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC for interim reporting.

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company believe that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Foreign currency translation

Non-U.S. dollar denominated transactions and balances have been re-measured to U.S. dollars. All gains and losses from re-measurement of monetary balance sheet items denominated in non-U.S. dollar currencies are reflected in the statements of operations as other comprehensive income, as appropriate. The cumulative translation gains as of the years ended March 31, 2022 and 2021 were $6and 2020 were $5 and $0,$5, respectively.

Revenue recognition

It is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 “Revenue Recognition.” Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation. Adoption of ASC 606 has not changed the timing and nature of the Company’s revenue recognition and there has been no material effect on the Company’s financial statements.

Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from coupons, discounts, chargebacks and distributor fees, processing fees, as well as allowances for returns and government rebates. The Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue. Collectability of revenue is reasonably assured based on historical evidence of collectability between the Company and its customers.

Revenues from sales to distributors are recognized at the time the products are delivered to the distributors (“sell-in”). The Company does not grant rights of return, credits, rebates, price protection, or other privileges on its products to distributors.

Sequencing

The Company adopted a sequencing policy under ASC 815-40-35 whereby if reclassification of contracts from equity to liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares. This was due to the Company committing more shares than authorized. While temporary suspensions are in place to keep the potential exercises beneath the number authorized, certain instruments are classified as liabilities, after allocating available authorized shares on the basis of the most recent grant date of potentially dilutive instruments. Pursuant to ASC 815, issuances of securities granted as compensation in a share-based payment arrangement are not subject to the sequencing policy.

Recently adopted accounting standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. On January 1, 2020, we adopted ASU 2016-02 and its related amendments, which changed our accounting for leases. As a result of this change, we recognized right-of-use assets and lease liabilities on the consolidated balance sheet for all leases with a term longer than 12 months and classified them as operating leases. The right-of-use assets and lease liabilities have been measured by the present value of remaining lease payments over the lease term using our incremental borrowing rates or implicit rates, when readily determinable.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, “Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. The Company will be required to adopt this ASU for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of Topic 326 did not have a material on the Company’s financial statements and financial statement disclosures.

NOTE 4 – STOCKHOLDERS’ EQUITY

Common stock and over-issuance

The common stock confers upon the holders the right to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends, if declared, and to participate in the distribution of the surplus assets and funds of the Company in the event of liquidation, dissolution or winding up of the Company.

As of December 3, 2020, we had 20,000,000 authorized shares of our common stock and 19,850,014 shares of common stock outstanding resulting in 149,986 shares of common stock being available for issuance. On December 4, 2020, certain holders of the Company’s Series C Preferred Stock converted 396,509 shares of Series C Preferred Stock into 396,509 shares of common stock, resulting in an overissue of 246,523 shares of common stock. Beginning on December 17, 2020, through January 22, 2021, certain holders of warrants we had issued in December 2020 (the “December 2020 Warrants”) exercised a portion of the December 2020 Warrants for 2,657,144 shares of Common Stock, resulting in an additional overissue of 2,657,144 shares of Common Stock. As of December 31, 2020, the aggregate number of shares of common stock that was overissued by the Company was 4,109,635. The shares issued in excess of the authorized amount are classified as liabilities. The common stock equivalents are subject to the Company’s sequencing policy and are classified as derivative liabilities (see Note 5). On March 3, 2021, the Company filed a proxy statement in connection with a special meeting of stockholders to was to be held on March 31, 2021, but postponed until May 6, 2021 to (i) ratify the increase in the number of authorized shares of common stock from 20,000,000 to 24,109,635 and the issuance of such 4,109,635 shares of common stock, and (ii) further increase the number of our authorized shares of common stock. On May 6, 2021, the Company’s stockholders voted to approve the ratification of the increase in the number of authorized shares of common stock from 20,000,000 to 24,109,635 and the issuance of such 4,109,635 shares of common stock to be effective as of December 4, 2020, but the stockholders did not approve a further increase in the number of its authorized shares of common stock. We have filed with

On August 17, 2021, the SecretaryCompany’s stockholders voted to approve an amendment to the Company’s Amended and Restated Certificate of StateIncorporation to increase the number of shares of the StateCompany’s Common Stock authorized for issuance from 24,109,635 shares to 40,000,000 shares. As a result of Delaware a Certificatethe vote to increase the number of Validation with respectshares authorized for issuance, the warrants that were previously accounted for as derivative liabilities were marked to market through the Share Increase Ratificationdate of approval and such Certificatethen reclassified to additional paid in capital (equity), as the Company had sufficient authorized shares to settle the exercise of Validation has become effective.the warrants.

Stock-based compensation and Options

During the three-month period ended March 31, 2022 and 2021, 120,000and 2020, 180,000 and 0 options were granted, respectively. The options were granted to a employees and consultants in 2021board members and were recorded at a fair value and vested over three years.years. During the three-month periodperiods ended March 31, 20212022 and 2020,2021, stock-based compensation expense of $109$86 and $71$109 was recorded for options that vested, respectively.

The fair value for options granted in the first quarter of 2022 and 2021 is estimated at the date of grant using a Black-Scholes-Merton options pricing model with the following underlying assumptions:

SCHEDULE OF FAIR VALUE ASSUMPTIONS FOR OPTIONS GRANTED

The total stock-based expense recognized in the financial statements for services received from employees and non-employees is shown in the following table.

SCHEDULE OF STOCK BASED EXPENSES RECOGNIZED FOR SERVICES FROM EMPLOYEES AND NON-EMPLOYEES

As of March 31, 2021,2022, the total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $197,$554, which is expected to be recognized over a weighted average period of approximately 0.552.05 years.

Series E Preferred Stock conversion to common stock

Each share of Series E Preferred Stock is convertible at any time and from time to time at the option of a holder of Series E Preferred Stock into one share of the Company’s common stock, provided that each holder would be prohibited from converting Series E Preferred Stock into shares of the Company’s common stock if, as a result of such conversion, any such holder, together with its affiliates, would own more than 9.99% of the total number of shares of the Company’s common stock then issued and outstanding. This limitation may be waived with respect to a holder upon such holder’s provision of not less than 61 days’ prior written notice to the Company.

In February 2020, a stockholder converted 110,000 shares of Series E Preferred Stock into 110,000 shares of common stock at a conversion rate of 1 to 1. No purchase was made in order to convert these shares.

Warrant exercises and modification

On December 2, 2020, we entered into a Securities Purchase Agreement with certain institutional and accredited investors pursuant to which the Company issued and sold to such investors in a private placement an aggregate of (i) 5,914,285 shares of the Company’s common stock at an offering price of $0.70$0.70 per share and (ii) pre-funded warrants to purchase up to 2,657,144 shares of common stock at a purchase price of $0.699$0.699 per pre-funded warrant, for gross proceeds of approximately $6.0$6.0 million, and net proceeds of approximately $5.4$5.4 million. In January 2021, two investors exercised an aggregate of 1,657,144 warrants at $0.001$0.001 per share.

On January 21, 2021, Company entered into letter agreements (the “Letter Agreements”) with certain existing accredited investors to exercise certain outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of 1,205,968 shares of the Company’s common stock at an exercise price per share of $1.165$1.165 (the “Exercise”). Certain of the Existing Warrants (the “Registered Existing Warrants”) and the shares of common stock underlying the Registered Existing Warrants have been registered pursuant to a registration statement on Form S-3 (File No. 333-251264) and a registration statement on Form S-1 (File No. 333-218871). In consideration for the exercise of the Existing Warrants for cash, the exercising holders will receive new unregistered warrants to purchase up to an aggregate of 1,205,967 shares of common stock (the “New Warrants”) at an exercise price of $1.04$1.04 per share and with an exercise period of seven years from the initial closing date. The gross proceeds to the Company from the Exercise were approximately $1.4$1.4 million.

The New Warrants were accounted for in warrant modification expense, which was measured at the amount equal to the incremental value reflecting the change in the fair value of the warrants before and after the Warrant Amendment. Accordingly, warrant modification expense in the amount of $1,627$0 and $1,627 was recorded for the quarters ended March 31, 2022 and 2021, respectively, with a corresponding increase in additional paid in capital.

In estimating the warrants’ fair value, the Company used the following assumptions:

SCHEDULE OF FAIR VALUE ASSUMPTIONS FOR WARRANTS

NOTE 5 – DERIVATIVE LIABILITIES

During 2020, the Company established a sequencing policy to which common stock equivalents are exercisable to shares of common stock more than the Company’s authorized limit. It was determined that all options and warrants by the end of the year were no longer permitted to be classified as equity and were valued at fair market value using Black Scholes and recorded as derivative liabilities.

A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s purchase warrants that were categorized within Level 3 of the fair value hierarchy during the quarter ended March 31, 2021 is as follows:

The foregoing assumptions were reviewed quarterly and were subject to change based primarily on management’s assessment of the probability of the events described occurring.

Financial Liabilities Measured at Fair Value on a Recurring Basis

The fair value accounting standards define fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows:

There were no transfers between Level 3 during the three months ended March 31, 2021.

The following table presents changes in Level 3 liabilities measured at fair value for the three months ended March 31, 2021.

NOTE 6 – LEASES

The Company has operating lease agreements with terms up to 3 years, including car leases.

The Company’s weighted-average remaining lease term relating to its operating leases is 2.80 years, with a weighted-average discount rate of 10%.

The Company incurred $6 of lease expense for its operating leases for the quarter ended March 31, 2021.

The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases as of March 31, 2021:

NOTE 75 – LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDER

Basic net loss per common share (“Basic EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. All outstanding stock options and warrants for the three months ended March 31, 20212022 and 20202021 have been excluded from the calculation of the diluted net loss per share because all such securities are anti-dilutive for all periods presented.

The following table summarizes the Company’s securities, in common stock equivalents, which have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive:

SUMMARY OF COMMON SHARE EQUIVALENTS BEEN EXCLUDED FROM DILUTIVE LOSS PER SHARE AS ANTI-DILUTIVE

The diluted loss per share equals basic loss per share in the three months ended March 31, 20212022 and 20202021 because the Company had a net loss and the impact of the assumed exercise of stock options and the vesting of restricted stock would have been anti-dilutive.

NOTE 86 – GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA

Summary information about geographic areas:

The Company manages its business on the basis of one reportable segment and derives revenues from selling its products directly to patients as well as through distributor agreements. The following is a summary of revenues within geographic areas:

SUMMARY OF REVENUE WITHIN GEOGRAPHIC AREAS

For the three months ended March 31, 2022, one customer comprised approximately 39% of total revenues. During the three months ended March 31, 2021, one customer comprised approximately 58% of total revenues.

NOTE 97 – OTHER ASSETS

On April 9, 2020, pursuant to a licensing agreement entered into in March 2020, the Company received 10-year10-year warrants to purchase 127,000 shares of Sanuwave Health, Inc. at a price of $0.19$0.19 per share. The fair value for warrants received is estimated at the date of grant using a Black-Scholes-Merton pricing model with the following underlying assumptions:

SCHEDULE OF WARRANTS ASSUMPTIONS

The Company considers this to be level 3 inputs and is valued at each reporting period. The fair value of these warrants decreased by $2had no movements during the quarter, leaving a balance of $21$19 as of March 31, 2022 and December 31, 2021.

Financial Instruments Measured at Fair Value on a Recurring Basis

The fair value accounting standards define fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows:

There were no transfers between Level 3 during the quarters ended March 31, 2022 and 2021.

The following table presents changes in Level 3 asset and liability measured at fair value for the quarters ended March 31, 2022 and 2021:

SCHEDULE OF CHANGES IN LEVEL 3 AND LIABILITY MEASURED AT FAIR VALUE

The following table sets forth the Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy:

SCHEDULE OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

NOTE 108 – COMMITMENTS AND CONTINGENCIES

Other Risks

On March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic, and the COVID-19 pandemic has resulted in significant financial market volatility and uncertainty. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common shares.

In addition, U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. A continuation or worsening of the levels of market disruption and volatility could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common shares.

Pending litigation

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 the Company is in breach of an Exclusive Distribution Agreement dated March 7, 2019 (the “Agreement”) between Protrade and the Company. Protrade alleges, in part, that the Company has breached the 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$3 million.

On March 15, 2022, the arbitrator issued a final award, which, although found that Protrade’s claims failed as a matter of law or were unsupported by the evidence, nevertheless 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 the Company allegedly failed to supply Protrade with certain patches utilized by users of DV0057 Painshield MD device. The arbitrator based her decision on the basis of testimony of Protrade’s president who asserted that a user would use in excess of 33 patches per each device. The Company believes it is too early to determinethat the most likely outcome. The Company disputes the claims assertednumber of patches per device alleged by Protrade and intends to respond tois grossly inflated. Accordingly, on April 13, 2022, the Request and defend againstCompany submitted an application for the claims vigorously.

NOTE 11 – OTHER LIABILITIES

In January 2021, investors attempted exercise warrants for 663,332 sharescorrection of common stock for an aggregate amount of $390. Due to the Company’s lack of authorized shares,award. If the application is denied, the Company will continue vehemently opposing the award in April 2021, the proceeds from the exercise of $390 was returned to the investors.all appropriate fora.

NOTE 129 – SUBSEQUENT EVENTS

On April 6, 2021,The Company has evaluated subsequent events through the Company agreed to purchase 663,332 warrants from investors for a totaldate of $388. The warrants had exercise prices between $0.88filing this Quarterly Report on Form 10-Q and $0.94 per share.determined that no material events occurred.

At the Special Meeting on May 6, 2021, our stockholders approved the ratification, pursuant to Section 204 of the Delaware General Corporation Law and Delaware common law, of an increase in the number of authorized shares of our common stock from 20,000,000 to 24,109,635 shares and the issuance of 4,109,635 shares of common stock upon conversion and exercise of certain of the Company’s securities as more particularly described in the Company’s definitive proxy statement filed with the SEC on March 3, 2021 (the “Share Increase Ratification”). We have filed with the Secretary of State of the State of Delaware a Certificate of Validation with respect to the Share Increase Ratification and such Certificate of Validation has become effective.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition of NanoVibronix, Inc. (the “Company”) as of March 31, 20212022 and for the three months ended March 31, 20212022 and 20202021 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 20202021 and for the year then ended, which are included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 15, 2021.2022, as amended on May 2, 2022. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this Quarterly Report, in our other reports filed with the SEC, and other factors that we may not know.

Cautionary Note Regarding Forward-Looking Statements

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 regulation. 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:

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 for the fiscal year ended December 31, 2020,2021, as amended, and those described from time to time in our future reports filed with the Securities and Exchange Commission. 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.

Overview

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.

Recent Events and Developments

COVID-19On 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 the Company is in breach of an Exclusive Distribution Agreement dated March 7, 2019 (the “Agreement”) between Protrade and the Company. Protrade alleges, in part, that the Company has breached the 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.

In December 2019,On March 15, 2022, the arbitrator issued a strainfinal award, which, although found that Protrade’s claims failed as a matter of coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China, and has reached multiple other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures in China and other affected countries. The ongoing COVID-19 pandemic has and may continue to adversely impact our business, as our operations are based in and rely on third parties located in countries affectedlaw or were unsupported by the pandemic. Our third-party manufacturer,evidence, nevertheless 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 the Company allegedly failed to supply Protrade with certain patches utilized by users of DV0057 Painshield MD device. The arbitrator based her decision on the basis of testimony of Protrade’s president who asserted that a user would use in excess of 33 patches per each device. The Company believes that the number of patches per device alleged by Protrade is based in China, temporarily shut down for sixty days due togrossly inflated. Accordingly, on April 13, 2022, the pandemic and became fully operational in April 2020 which led to a significant delay in the production of goods needed to fulfill our sales orders, which were scheduled to be fulfilled in our first quarter of 2020. We were able to fulfill these orders in the second quarter of 2020. Additionally, the notified regulatory body we rely on to obtain European CE approval is located in Italy and has been shut down for approximately six weeks from March to April 2020, which delayed our submission for CE mark approvalCompany submitted an application for the year 2020. The CE Mark was subsequently approved in April 2020. The various precautionary measures taken by many governmental authorities around the world in order to limit the spread of COVID-19 has had and may continue to have an adverse effect on the global markets and global economy, including on the availability and pricing of employees, resources, materials, manufacturing and delivery efforts and other aspectscorrection of the global economy. The financial downturn has compelled us to furlough or reduce working hours for muchaward. If the application is denied, the Company will continue vehemently opposing the award in all appropriate fora. As of our operating staff for several months during the second quarter of 2020,March 31, 2022 and has forced our remaining staff as well as third-party contractors to work remotely. In addition, many staff members continue to operate remotely from their homes, which is continuing to result in delays in obtaining certain financial records. We also rely on third-party professionals to provide services such as the preparation of our financial statements and to conduct audits, and many of these parties have been affected by government-imposed precautionary measures, thereby delaying our receipt of these services. Such government-imposed precautionary measures may have been relaxed in certain countries or states, but there is no assurance that more strict measures will be put in place again due to a resurgence in COVID-19 cases. Therefore, the COVID-19 pandemic has and may again disrupt production and cause delays in the supply and delivery of our products, may continue to affect our operation, may further divert the attention and efforts of the medical community to coping with COVID-19 and disrupt the marketplace in which we operate and may have a material adverse effect on our operations. Assessment of the complete extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. The continuation of the COVID-19 pandemic could materially disrupt our business and operations, hamper our ability to raise additional funds or sell or securities, continue to slow down the overall economy, curtail consumer spending, interrupt our sources of supply, and make it hard to adequately staff our operations.

Business Developments

Effective as of January 2020, the U.S. Centers for Medicare and Medicaid Services (“CMS”) approved our PainShield™ for reimbursement for Medicare beneficiaries on a national basis. We were notified on March 30, 2020 that our Medicare Enrollment Application was approved, and we are now an approved Medicare Supplier for DME through the National Supplier Clearinghouse, Palmetto-GBA as well as Noridian Administrative Services, LLC, the two Medicare Administrative Contractors that handle DME reimbursement nationwide. PainShield is currently available for Medicare reimbursement on a national level under new HCPCS (Healthcare Common Procedure Coding System) code K1004.

In March 2020, we signed a license agreement with Sanuwave Health, Inc. for the manufacture and delivery of our WoundShield technology. Under the terms of the agreement, we will receive warrants to purchase 127,000 shares of Sanuwave stock, a $250,000 milestone payment based on receipt of U.S. Food and Drug Administration approval, and 10% royalty on Sanuwave’s gross revenues from sales or rentals of WoundShield. In return, Sanuwave has received the worldwide, exclusive rights to our WoundShield product and technology. In addition, Sanuwave will bear the costs and clinical validation responsibilities associated with obtaining approval for WoundShield from the U.S. Food and Drug Administration and other regulatory agencies around the world.

In September 2020, the U.S. FDA exercised its Enforcement Discretion to allow distribution of our UroShield device in the United States. This temporary authorization is limited to use as an extracorporeal acoustic wave generating accessory to urological indwelling catheter for use during the COVID-19 pandemic.

Nasdaq Stockholders’ Equity Minimum

On April 21,December 31, 2021, the Company accrued the amount of the award to Protrade amounting to $1,500,250 as part of “Other accounts payable and accrued expenses”.

On March 2, 2022, we received noticea letter from the Listing Qualifications Department (the “Staff”) of Thethe Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the Company no longer satisfiedclosing bid price of our common stock for the 30 consecutive business day period between January 14, 2022, through March 1, 2022, we did not meet the minimum $2.5 million stockholders’ equity requirementbid price of $1.00 per share required for continued listing on The Nasdaq Capital Market underpursuant to Nasdaq Listing Rule 5550(b)(1) (the “Equity Requirement”)5550(a)(2). The Company reported stockholders’ equity of approximately $2.4 million in its Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2020 and does not otherwise satisfy the alternative criteria pertaining to market value of listed securities or net income. In accordanceletter also indicated that we will be provided with the Nasdaq Listing Rules, the Company has been granted a compliance period of 45180 calendar days, or through June 7, 2021,until August 29, 2022, in which to submit its planregain compliance pursuant to evidenceNasdaq Listing Rule 5810(c)(3)(A). The letter further provided that if, at any time during the 180-day period, the closing bid price of our common stock was at least $1.00 for a minimum of 10 consecutive business days, Nasdaq would provide us with written confirmation that it had achieved compliance with the Equity Requirement for the Staff’s review. If the Company’s plan is accepted, the Staff may grant the Company an extension of up to 180 calendar days from the date of the notification letter, or October 18, 2021, to evidence compliance with the Equity Requirement. While the Company is evaluating various courses of action in its effort to regain compliance with the Equity Requirement and plans to timely submit a compliance plan to the Staff for its review, there can be no assurance that the Company’s plan will be accepted by the Staff or, if accepted, that the Company will be able to timely satisfy the terms of the extension granted by the Staff. If the Company’s plan is not accepted by the Staff or if accepted but the Company does not timely regain compliance, the Company’s common stock would be subject to delisting. In such event, the Company would be entitled to request a hearing before a Nasdaq Hearings Panel, which request would stay any delisting action by Nasdaq at least until the ultimate conclusion of the hearing process.minimum bid price requirement.

Critical Accounting Policies

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 for the fiscal year ended December 31, 2020.2021, as amended. There have not been any material changes to such critical accounting policies since December 31, 2020.2021.

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.

Results of Operations

Three Months Ended March 31, 20212022 Compared to Three Months Ended March 31, 20202021

Revenues. For the three months ended March 31, 20212022 and 2020,2021, our revenues were approximately $272,000 and $103,000 and $114,000 respectively, a decreasean increase of approximately 10%164%, or $11,000$169,000 between the periods. The increase in revenues is due to increased orders from our largest customer (see Note 6), as well as the addition of selling to veteran administration facilities, limited to available finished goods. Our revenues may fluctuate as we add new consumers or when existing distributors or consumers make large purchases of our products during one period and no purchases during another period. Therefore, any growth or decrease in revenues by quarter may not be linear or consistent.

For the three months ended March 31, 2021 and 2020,2022, the percentage of revenues attributable to our products was: PainShield - 100%99% and UroShield - 1%. For the three months ended March 31, 2021, the percentage of revenues attributable to our products was: PainShield -100% and UroShield - 0%. For the three months ended March 31, 20212022 and 2020,2021, the portion of our revenues that was derived from distributors was 94%87% and 99%94%, respectively.

Gross Profit. For the three months ended March 31, 20212022 and 2020,2021, gross profit was approximately $77,000$106,000 and $51,000,$77,000, respectively, an increase of approximately 51%38% or $26,000,$29,000, mainly due to increased sales to veteran affairs (VA) facilities and sales of our products to distributors at higher margins and during the same period, the Company did not offer special discounts on products as was done in the same fiscal period during 2020.margins.

Gross profit as a percentage of revenues was approximately 75%39% and 45%75% for the three months ended March 31, 2022 and 2021, and 2020, respectively. The increase inWhile the total amount of gross profit increased, the gross profit as a percentage is mainlyof revenues decreased due to the reason described above.increased costs of manufacturing, patches that were expired and written off, and replacement of old components.

Research and Development Expenses. For the three months ended March 31, 20212022 and 2020,2021, research and development expenses were approximately $64,000$66,000 and $47,000,$64,000, respectively between the periods. The increase was mainly due to options expenseincrease in payments to subcontractors and consultants for continuous research, offset by the decreased salaries of employees involved in research and development activities during the three months ended March 31, 2021.2022.

Research and development expenses as a percentage of total revenues were approximately 62%24% and 42%62% for the three months ended March 30,31, 2022 and 2021, and 2020, respectively. This decrease was due to the increase in revenues.

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, clinical trial and facilities expenses associated with and allocated to research and development activities.

Selling and Marketing Expenses. For the three months ended March 31, 20212022 and 2020,2021, selling and marketing expenses were approximately $210,000 and $311,000, and $254,000, respectively, an increasea decrease of approximately 22%32%, or $57,000,$101,000, between the periods. The increasedecrease was primarily due to increaseddecreased salaries of sales and consulting feesmarketing employees, re-allocating a portion of sales and marketing employee’s salary to general and administrative expense due to change in roles and responsibilities, and decrease in options expense during the first quarter of 2021.2022.

Selling and marketing expenses as a percentage of total revenues were approximately 302%77% and 223%302% for the three months ended March 31, 2022 and 2021, respectively. The decrease in our percentage was due to the increase in revenues and 2020, respectively.the reasons described above.

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.

General and Administrative Expenses. For the three months ended March 31, 20212022 and 2020,2021, general and administrative expenses were approximately $942,000 and $1,016,000, and $657,000, respectively, an increasea decrease of approximately 55%7%, or $359,000,$74,000, between the periods. The increasedecrease was primarily due to legal fees related to a lawsuit with a former officer and director and efforts to ratify our prior overissuancesover-issuances of common stock.stock in 2021 that were not incurred in 2022.

General and administrative expenses as a percentage of total revenues were approximately 986%346% and 576%986% for the three months ended March 31, 2022 and 2021, and 2020, respectively.

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.

Financial expenses, net. For the three months ended March 31, 2021 and 2020, financial expenses, net was approximately $7,000 compared to a $5,000, respectively, an increase of approximately $2,000 between the periods due to the change in fair value of the investment in Sanuwave.

Change in fair value of derivative liabilities. For the three months ended March 31, 20212022 and 20202021, there was a change in fair value of derivative liabilities resulting in losses of approximately $1,948,000$0 and $0,$1,948,000, respectively. The loss in 2021 was derived from the Company’s total potentially dilutive shares exceed the Company’s authorized share limit.limit that was ultimately resolved in the third quarter of 2021.