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

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

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 ☒ 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 ~~(§232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant ~~was~~has been required to submit and post such files). Yes ☒ 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).

The number of shares outstanding of the registrant’s Common Stock as of ~~November 15, 2021~~August 11, 2022 was ~~27,946,793~~ 27,997,793shares.

							June 30, 2022			December 31, 2021
	September 30, 2021			December 31, 2020			(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	8,599		$	7,142
Restricted cash		-			391
Trade receivables		28			25
Cash							$	3,944		$	7,737
Trade receivables, net								262			200
Other accounts receivable and prepaid expenses		597			267			1,175			230
Inventory		201			145
Inventory, net								928			175
Total current assets		9,425			7,970			6,309			8,342

Non-current assets:
Fixed assets, net		6			4			7			5
Other assets		16			25			9			19
Severance pay fund		199			199			184			207
Operating lease right-of-use assets, net		20			31			33			49
Total non-current assets		241			259			233			280
Total assets	$	9,666		$	8,229		$	6,542		$	8,622

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Current liabilities:
Trade payables	$	62		$	144		$	173		$	87
Other accounts payable and accrued expenses		194			488			1,803			1,723
Shares issued in excess of authorized		-			2,257
Deferred revenues								44			44
Operating lease liabilities - current		10			13			33			49
Total current liabilities		266			2,902			2,053			1,903

Non-current liabilities:
Accrued severance pay	$	243			245		$	225			253
Deferred licensing income		165			199			130			153
Deferred revenue		271			-
Derivative liabilities		-			2,471
Operating lease liabilities, non-current		10			18
Total liabilities		955			5,835			2,408			2,309

Commitments and contingencies (Note 9)		-			-			-

Stockholders’ equity:
Series C Preferred stock of $0.001 par value - Authorized: 3,000,000 shares at September 30, 2021 and December 31, 2020; Issued and outstanding: 666,667 at September 30, 2021 and December 31, 2020		1			1
Series C Preferred stock of $0.001 par value - Authorized: 3,000,000 shares at June 30, 2022 and December 31, 2021; Issued and outstanding: 0 at both at June 30, 2022 and December 31, 2021								-			-

Series D Preferred stock of $0.001 par value - Authorized: 506 shares at September 30, 2021 and December 31, 2020; Issued and outstanding: 153 at September 30, 2021 and December 31, 2020		-			-
Series D Preferred stock of $0.001 par value - Authorized: 506 shares at June 30, 2022 and December 31, 2021: Issued and outstanding: 0 at both June 30, 2022 and December 31, 2021								-			-

Series E Preferred stock of $0.001 par value - Authorized: 1,999,494 shares at September 30, 2021 and December 31, 2020, respectively; Issued and outstanding: 0 at September 30, 2021 and 875,000 at December 31, 2020		1			1
Series E Preferred stock of $0.001 par value - Authorized: 1,999,494 shares at June 30, 2022 and December 31, 2021, respectively; Issued and outstanding: 0 at both June 30, 2022 and December 31, 2021								-			-
Preferred stock, value								-			-
Common stock of $0.001 par value - Authorized: 40,000,000 shares at September 30, 2021 and 24,109,634 at December 31, 2020; Issued and outstanding: 27,178,126 and 21,246,523 shares at September 30, 2021 and December 31, 2020, respectively		27			22

Common stock of $0.001 par value - Authorized: 40,000,000 shares at June 30, 2022 and December 31, 2021; Issued and outstanding: 27,997,793 shares at both June 30, 2022 and December 31, 2021								28			28

Additional paid in capital		63,086			44,959			63,468			63,162
Accumulated other comprehensive income		59			66			9			60
Accumulated deficit		(54,463	)		(42,655	)		(59,371	)		(56,937	)
Total stockholders’ equity		8,711			2,394			4,134			6,313
Total liabilities and stockholders’ equity	$	9,666		$	8,229		$	6,542		$	8,622

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

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

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.

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~~During the first and ~~historically has incurred losses from operations and expects to do so in~~second quarters of 2022, the ~~foreseeable future. The Company has historically had recurring losses and negative~~Company’s cash used ~~from~~in operations ~~which raised substantial doubt about the Company’s ability to continue as~~was $3,740 leaving a ~~going concern. During the nine months ended September 30, 2021, the Company used $3,504~~ of cash ~~in operations. Although we expect to continue to incur losses and negative cash flows from operating activities, we had cash balances~~balance of $~~8,599~~3,944 as of ~~September~~June 30, ~~2021.~~2022. Because the Company ~~has~~does not have sufficient resources to fund our operation for the next twelve months from the date of this filing, ~~the~~management has substantial doubt ~~has been alleviated.~~of the Company’s ability to continue as a going concern. The Company 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 we 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, the Company will be limited in its ability to raise additional capital.

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.

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, ~~2020~~2021 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.

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.

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 ~~(losses)~~ as of the ~~nine months~~periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were $~~($7)~~51 and $87, respectively.

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.

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.

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.

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~~ ~~4,109,634~~. 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.~~

On August 17, 2021, the Company’s stockholders voted to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of the Company’s Common Stock authorized for issuance from ~~24,109,635~~ ~~shares to~~ ~~40,000,000~~ shares. As a result of the vote to increase the number of shares authorized for issuance, the warrants that were previously accounted for as derivative liabilities were marked to market through the date of approval and then reclassified to additional paid in capital (equity), as the Company had sufficient authorized shares to settle the exercise of the warrants.

During the ~~nine-month~~six-month period ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ ~~180,000~~120,000 and ~~137,000~~180,000 options were granted, respectively. The options were granted to a employees and ~~consultants in 2021~~board members and were recorded at a fair value and ~~vested~~vest over three years. During the three and ~~nine-month~~six-month period ended ~~September~~June 30, ~~2021,~~2022, stock-based compensation expense of $99220 and $306 was recorded for options that vested, respectively. During the three and ~~nine-month~~six-month period ended ~~September~~June 30, ~~2020,~~2021, there was stock-based compensation expense of $~~123~~99 and $~~326~~208, respectively. During the ~~nine months ended September 30,~~second quarter of 2022 and 2021,0 and 13,845 options ~~expired.~~expired, respectively.

The fair value for options granted in the second 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:

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 ~~September~~June 30, ~~2021,~~2022, the total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $95390, which is expected to be recognized over a weighted average period of approximately ~~1.04~~ ~~years.~~

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.

~~On August 17, 2021, a shareholder converted~~ ~~875,000~~2.5 ~~shares of Series E Preferred Stock into~~ ~~875,000~~ ~~shares of common stock at a conversion rate of 1 to 1. No purchase was made in order to convert these shares. As of September 30, 2021, there were no shares of Series E Preferred Stock outstanding.~~years.

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) 5,914,285shares of the Company’s common stock at an offering price of $0.70per share and (ii) pre-funded warrants to purchase up to 2,657,144shares of common stock at a purchase price of $0.699per pre-funded warrant, for gross proceeds of approximately $6.0million, and net proceeds of approximately $5.4million. In January 2021, two investors exercised an aggregate of 1,657,144warrants at $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 (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 received 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 $1.04per 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 ~~million.~~

~~In August and September 2021, investors exercised~~ ~~1,477,035~~ ~~warrants between $0.88~~ ~~and $2.50~~ ~~per share for proceeds of approximately $3.6~~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 was recorded with a corresponding increase in additional paid in capital in the second quarter of 2021.

On June 14, 2022, the Company issued warrants to two sales consultants to purchase 250,000 shares of common stock which will expire on June 14, 2029 and have an exercise price of $1.00 per share. Accordingly, expense related to these warrants in the amount of $135,000 was recorded with a corresponding increase in additional paid in capital.

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

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.

~~On April 6, 2021, the Company agreed to buy back~~ ~~663,332~~ ~~warrants from investors for a total of $368. The warrants had exercise prices between $0.88~~ ~~and $0.94~~ ~~per share. The value of the derivative liabilities associated with these warrants was $451. The Company recorded a $~~64 ~~gain in connection with the buy back of the warrants.~~

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 September 30, 2021 is as follows:

~~SUMMARY OF QUANTITATIVE INFORMATION TO VALUATION METHODOLOGY AND UNOBSERVABLE INPUTS~~

~~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.~~

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 and nine months ended September 30, 2021.~~

~~The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2021.~~

~~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~~ ~~2.92~~ ~~years, with a weighted-average discount rate of~~ 10%.

~~The Company incurred $~~4 ~~and $~~10 ~~of lease expense for its operating leases for the three months and nine months ended September 30, 2021, respectively.~~

~~The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases as of September 30, 2021:~~

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 and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 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 and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 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.

The Company manages its business based 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:

For the three and six months ended June 30, 2022, one customer comprised approximately 78% and 64% of total revenues, respectively.

On April 9, 2020, pursuant to a licensing agreement entered into in March 2020, the Company received 10-year warrants to purchase 127,000 shares of Sanuwave Health, Inc. at a price of $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:

The Company considers this to be level 3 inputs and is valued at each reporting period. ~~The~~For the three and six months ended June 30, 2022, changes in the fair value of these warrants ~~decreased by~~amounted to $8 and $10 ~~during the nine months ended September 30, 2021,~~, respectively, leaving a balance of $149. as of June 30, 2022. For the three and six months ended June 30, 2021, changes in the fair value of these warrants amounted to $2, respectively, leaving a balance of $23 as of June 30, 2021.

There were no transfers from Level 3 during the quarters ended June 30, 2022 and 2021.

The following table presents changes in Level 3 asset and liability measured at fair value for the quarters ended June 30, 2022 and 2021:

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:

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.

Lastly, inflation, as well as some of the measures taken by or that may be taken by the governments in countries where we operate in an attempt to curb inflation may have negative effects on the economies of those countries generally. If the United States or other countries where we operate experience substantial inflation in the future, our business may be adversely affected. This could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Specifically, our existing distributor agreements limit the amount that we can increase the price that we sell our products to the distributors. Accordingly, an inflationary environment, including factors such as increasing freight and materials prices, could make it less profitable for us to do business.

On March 15, 2022, the arbitrator issued a final award, which, although denied all Protrade’s claims, nevertheless awarded Protrade about $1.5 million, on the grounds that the Company allegedly failed to fulfill an order for reusable hydrogel patches placed after the Agreement was terminated. The arbitrator based her decision on the basis of ~~the date~~testimony of ~~this report,~~Protrade’s president who asserted that a patient would use in excess of 33 reusable patches per each device, which the parties have respectively submitted the initial Request for Arbitration and Response to Request for Arbitration with Counterclaims and agreed on a procedural timeline pursuant to which final resolution of the arbitration is expected by February 2022 (if not dismissed or settled earlier). The Company believes it is ~~too early~~a grossly inflated number.

On April 5, 2022, Protrade filed a Petition with the Supreme Court of New York Nassau County seeking to ~~determine~~confirm the ~~most likely outcome.~~Award. On April 13, 2022, the Company submitted an application to the ICA seeking to correct an error in the award based on the evidence that the Company 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.

On July 22, 2022, the Company ~~disputes~~filed a motion seeking to vacate arbitration award on the ~~claims asserted~~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, the Company averred in its motion that Protrade’s witness made false statements in arbitration, and that the arbitrator resolved a claim that was never raised by Protrade and ~~intends~~that has no factual basis. The motion is currently pending. The Company will continue to ~~respond~~vigorously pursue its opposition to the ~~Request~~award in all appropriate fora.

As of June 30, 2022 and ~~defend against~~December 31, 2021, the ~~claims vigorously.~~Company accrued the amount of the award to Protrade amounting to $1,500,250 as part of “Other accounts payable and accrued expenses”. No additional accrual was made in relation with the legal arbitration since the previous quarter.

The Company has evaluated subsequent events through the date of filing this Quarterly Report on Form 10-Q and determined that no material events occurred.

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 ~~September~~June 30, ~~2021~~2022 and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 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, ~~2020~~2021 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.

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.

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.

~~COVID-19~~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 million.

~~In December 2019,~~On March 15, 2022, the arbitrator issued a strain 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 relyfinal award, which, although denied all Protrade’s claims, nevertheless awarded Protrade about $1.5 million, on ~~third parties located in countries affected by~~ the ~~pandemic. Our third-party manufacturer, which is based in China, temporarily shut down for sixty days due to~~grounds that the ~~pandemic and became fully operational in April 2020 which led to a significant delay in the production of goods needed~~Company allegedly failed 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~~an order for reusable hydrogel patches placed after the ~~second quarter of 2020. Additionally, the notified regulatory body we rely on to obtain European CE approval is located in Italy and~~Agreement was ~~shut down for approximately six weeks from March to April 2020, which delayed our submission for CE mark approval for the year 2020.~~terminated. 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 effectarbitrator based her decision on the ~~global markets and global economy, including on~~basis of testimony of Protrade’s president who asserted that a patient would use in excess of 33 reusable patches per each device, which the availability and pricing of employees, resources, materials, manufacturing and delivery efforts and other aspects of the global economy. The financial downturn compelled us to furlough or reduce working hours for much of our operating staff for several months during the second quarter of 2020, 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 from time to time as government regulations fluctuate, whichCompany believes is continuing to result in delays in obtaining certain financial records and may cause production delays in the foreseeable future. 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.

On April ~~21, 2021,~~5, 2022, Protrade filed a Petition with the Supreme Court of New York Nassau County seeking to confirm the Award. On April 13, 2022, the Company ~~received notice from~~submitted an application to the ~~Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) indicating~~ICA seeking to correct an error in the award based on the evidence that the Company ~~no longer satisfied~~only sold 2-3 reusable patches per device contrary to the ~~minimum $2.5 million stockholders’ equity requirement for continued listing on~~33 reusable patches claimed by Protrade. The Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1) (the “Equity Requirement”). The Company reported stockholders’ equity of approximately $2.4 million in its Annual Report on Form 10-K as of and forsame arbitrator who issued the ~~fiscal year ended December 31, 2020 and did not otherwise satisfy~~award, denied the alternative criteria pertaining to market value of listed securities or net income. In accordance with the Nasdaq Listing Rules, the Company was granted a period of 45 calendar days, or through June 7, 2021, to submit its plan to evidence compliance with the Equity Requirement for the Staff’s review. On May 24, 2021, the Company filed its Quarterly Report on Form 10-Q for the first quarter of 2021 and reported stockholders’ equity of approximately $4.3 million. On June 1, 2021, the Company was notified by Nasdaq that the Company regained compliance with Nasdaq’s listing qualifications and that this matter was now closed.

On July 22, 2022, the Company filed a 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, the Company averred in its 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. The motion is currently pending. The Company will continue to vigorously pursue its opposition to the award in all appropriate fora. As of June ~~17,~~30, 2022 and 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”. No additional accrual was made in relation with the legal arbitration since the previous quarter.

On March 2, 2022, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that, based upon the closing bid price of ~~the Company’s~~our common stock for the 30 consecutive business day period between ~~May 5, 2021,~~January 14, 2022, through ~~June 16, 2021, the Company~~March 1, 2022, we did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that ~~the Company~~we will be provided with a compliance period of 180 calendar days, or until ~~December 14, 2021,~~August 29, 2022, in which to regain compliance pursuant to Nasdaq 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 ~~the Company’s~~our common stock was at least $1.00 for a minimum of 10 consecutive business days, Nasdaq would provide ~~the Company~~us with written confirmation that it had achieved compliance with the minimum bid price requirement.

On August 9, 2021, the Company received a letter from Nasdaq notifying the Company that for the last 10 consecutive business days, from July 26, 2021 to August 6, 2021, the closing bid price of the Company’s common stock has been at $1.00 per share or greater, and, therefore, the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2) and this matter is now closed.

On October 29, 2021, the Company’s board of directors approved an amendment, effective immediately, to Article I, Section 1.4 of the Company’s amended and restated bylaws, lowering the number of holders of the shares entitled to vote at a meeting of stockholders constituting a quorum, in person or by proxy, from a majority to one-third.

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.

Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared to Three Months Ended ~~September~~June 30, ~~2020~~2021

Revenues. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, our revenues were approximately ~~$499,000~~$485,000 and ~~$150,000,~~$318,000 respectively, an increase of approximately ~~233%~~53%, or ~~$349,000,~~$167,000 between the periods. The increase was due to increased ~~sales due to~~orders from our ~~new contract with UPPI, in~~largest customer as well as the addition ~~to a new distributor that sells our products~~of selling to veterans administration facilities. 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 ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the percentage of revenues attributable to our products was: PainShield - ~~99%~~98% and UroShield - 1%2%. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the portion of our revenues that was derived from distributors was ~~95%~~97% and ~~85%~~3%, respectively.

Gross Profit. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, gross profit was approximately ~~$228,000~~$281,000 and ~~$99,000,~~$208,000, respectively, an increase of approximately ~~130%,~~35% or ~~$129,000,~~ $73,000, mainly due to increased sales to veteran affairs (VA) facilities and sales of ~~our~~ products ~~somewhat offset by increased costs of manufacturing and shipping compared~~ to ~~the same period last year.~~distributors at higher margins.

Gross profit as a percentage of revenues was approximately ~~46%~~58% and ~~66%~~65% for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The decrease in gross profit as a percentage is mainly due the increased manufacturing costs due to ~~the reasons described above.~~completing manufacturing in Israel as well as increased costs of manufacturing due to inflation.

Research and Development Expenses. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, research and development expenses were approximately ~~$50,000~~$61,000 and ~~$68,000,~~$64,000, respectively, between the periods. ~~The decrease was mainly due to reduced payroll costs during the three months ended September 30, 2021.~~

Research and development expenses as a percentage of total revenues were approximately 10% and 45% for the three months ended September 30, 2021 and 2020, respectively as we reassigned staff to production

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.

Research and development expenses as a percentage of total revenues were approximately 13% and 20% for the three months ended June 30, 2022 and 2021, respectively.

Selling and Marketing Expenses. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, selling and marketing expenses were approximately ~~$245,000~~$333,000 and ~~$289,000,~~$296,000, respectively, ~~a decrease~~an increase of approximately ~~15%~~13%, or ~~$44,000,~~$37,000, between the periods. The ~~decrease~~increase was primarily due to ~~decreased salaries and consulting fees~~the addition of a new sales consultant partially offset by reduction of payroll costs due to re-allocation of a sales executive’s payroll to administrative costs during the ~~third quarter of 2021 and reallocation of a member of our sales staff to administration.~~quarter.

~~Selling and marketing expenses as a percentage of total revenues were approximately 49% and 193% for the three months ended September 30, 2021 and 2020, respectively.~~

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.

Selling and marketing expenses as a percentage of total revenues were approximately 69% and 93% for the three months ended June 30, 2022 and 2021, respectively.

General and Administrative Expenses. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, general and administrative expenses were approximately ~~$801,000~~$1,155,000 and ~~$546,000,~~$839,000, respectively, an increase of approximately ~~47%~~38%, or ~~$255,000,~~$316,000, between the periods. The increase was ~~primarily~~mainly due to the ~~increase in professional fees related~~increased legal costs from the appeal of the arbitration litigation, increased consulting costs pertaining to ~~our shareholder meeting, increasing the number of outstanding shares,~~regulatory reviews and the ~~addition~~re-allocation of ~~two new employees and~~payroll costs of a sales executive’s payroll to administrative costs during the ~~reallocation of salary.~~

~~General and administrative expenses as a percentage of total revenues were approximately 161% and 364% for the three months ended September 30, 2021 and 2020, respectively.~~quarter.

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.

General and administrative expenses as a percentage of total revenues were approximately 238% and 264% for the three months ended June 30, 2022 and 2021, respectively.

~~Financial expenses,~~Other income (expense), net. For the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020, financial expenses,~~other income (expense), net ~~were~~was approximately ~~$23,000~~($18,000) compared to ~~financial expenses,~~a other income, net of ~~$15,000,~~$1,000, respectively, ~~an increase~~a decrease of approximately ~~$8,000~~$19,000 between the periods mainly due to the ~~resolution~~change in fair value of the ~~outstanding shares matter. The outstanding shares matter resulted~~investment in ~~a reclassification of derivative liabilities as equity during the three months ended September 30, 2021.~~Sanuwave.

Change in fair value of derivative liabilities. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021, there was a change in fair value of derivative liabilities resulting in a gain of approximately ~~$5,714,000~~$0 and ~~$0,~~$706,000, respectively. The ~~change~~gain in 2021 was ~~due to~~derived from the ~~resolution~~Company’s total potentially dilutive shares exceed the Company’s authorized share limit that was ultimately resolved in the third quarter of ~~outstanding shares matter. The outstanding shares matter resulted in a reclassification of derivative liabilities to equity during the three months ended September 30,~~ 2021.

~~Tax~~Gain on purchase of warrants. For the three months ended June 30, 2022 and 2021, there was a gain of approximately $0 and $64,000, respectively. The gain was related to the settlement of derivative liabilities which was the result of the repurchase of warrants from certain investors.

Income tax benefit (expense). For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, there was a tax expense of ~~$70,000~~($16,000) and a $4,000 tax benefit, ~~of $20,000,~~ respectively. The tax expense or benefit is computed by multiplying income before taxes at our Israeli subsidiary by the appropriate tax rate. ~~Tax expenses increased due to the expansion of our Israel operations.~~

Net loss. Our net loss increased by approximately ~~$5,753,000~~$1,086,000 or ~~624%~~503%, to approximately ~~$6,675,000~~$1,302,000 for the three months ended ~~September~~June 30, ~~2021~~2022 from approximately ~~$922,000~~$216,000 in the same period of ~~2020.~~2021. The increase in net loss resulted primarily from the factors described above.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021

Revenues. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, our revenues were approximately ~~$920,000~~$757,000 and ~~$533,000,~~$421,000 respectively, an increase of approximately ~~73%~~80%, or ~~$387,000,~~$336,000 between the periods. The increase was due to increased ~~sales due~~orders from our largest customer, as well as the addition of selling to ~~our new contract with UPPI, in addition to a new distributor that sells our products to veterans~~veterans’ administration ~~facilities..~~facilities. 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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the percentage of revenues attributable to our products was: PainShield - ~~100%~~98% and UroShield ~~- 0%~~– 2%. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the portion of our revenues that was derived from distributors was 95% and ~~68%~~94%, respectively.

Gross Profit. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, gross profit was approximately ~~$513,000~~$387,000 and ~~$188,000,~~$285,000, respectively, an increase of approximately ~~173%,~~36% or ~~$325,000,~~ $102,000, mainly due to ~~increased~~ sales ~~of our products, enhanced by decreased costs of manufacturing in 2021, as we incurred several one-time costs in the transition of our manufacturing~~to veteran affairs (VA) facilities and sales of products to ~~a third-party manufacturer in 2020.~~distributors at higher margins.

Gross profit as a percentage of revenues was approximately ~~56%~~51% and ~~35%~~68% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~increase~~decrease in gross profit as a percentage is mainly due the increased manufacturing costs due to ~~the reasons described above.~~completing manufacturing in Israel as well as increased costs of manufacturing due to inflation.

Research and Development Expenses. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, research and development expenses were approximately ~~$178,000~~$127,000 and ~~$131,000,~~$128,000, respectively, a decrease of approximately 1%, or $1,000, between the periods. The increase was mainly due to increased payroll costs in 2021 compared to the same period in 2020, as we furloughed staff in the first six months of 2020 due to the impacts of the COVID-19 pandemic. This was partially offset by reduced payroll costs and reallocation of research and development costs to assembly in the third quarter.

~~Research and development expenses as a percentage of total revenues were approximately 19% and 25% for the nine months ended September 30, 2021 and 2020, respectively.~~

~~Selling~~Research and ~~Marketing Expenses~~. For the nine months ended September 30, 2021 and 2020, selling and marketing expenses were approximately $852,000 and $723,000, respectively, an increase of approximately 18%, or $129,000, between the periods. The increase was mainly due to increased salaries in 2021 compared to the same period in 2020, as we furloughed staff in the first six months of 2020 due to the impacts of the COVID-19 pandemic. This was partially offset by reduced payroll costs and reallocation of salary costs to administration in the third quarter.

~~Selling and marketing~~development expenses as a percentage of total revenues were approximately ~~93%~~17% and ~~136%~~30% for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, respectively.

Selling and ~~2020, respectively.~~Marketing Expenses. For the six months ended June 30, 2022 and 2021, selling and marketing expenses were approximately $543,000 and $607,000, respectively, a decrease of approximately 11%, or $64,000, between the periods. The decrease was due to reduction of payroll costs due to re-allocation of a sales executive’s payroll to administrative costs during the quarter.

Selling and marketing expenses as a percentage of total revenues were approximately 72% and 144% for the six months ended June 30, 2022 and 2021, respectively.

General and Administrative Expenses. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, general and administrative expenses were approximately ~~$2,656,000~~$2,097,000 and ~~$2,513,000,~~$1,855,000, respectively, an increase of approximately 6%13%, or ~~$143,000,~~$242,000, between the periods. The increase was ~~primarily~~mainly due to the ~~addition~~increased legal costs from the appeal of ~~new employees as well as~~ the ~~allocation~~arbitration litigation, increased consulting costs pertaining to regulatory reviews and the re-allocation of ~~salary~~payroll costs of a sales executive’s payroll to administrative costs during the ~~period.~~

~~General and administrative expenses as a percentage of total revenues were approximately 289% and 471% for the nine months ended September 30, 2021 and 2020, respectively.~~quarter.

~~Financial~~General and administrative expenses as a percentage of total revenues were approximately 277% and 441% for the six months ended June 30, 2022 and 2021, respectively.

Other income (expense), net.For the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020, financial~~other expenses, net ~~were~~was approximately ~~$29,000~~$31,000 compared to a ~~$25,000,~~$6,000, respectively, an increase of approximately ~~$4,000~~$25,000 between the periods mainly due to the ~~resolution~~change in fair value of the ~~outstanding shares matter. The outstanding shares matter resulted~~investment in ~~a reclassification of derivative liabilities as equity during the three months ended September 30, 2021.~~Sanuwave.

Change in fair value of derivative liabilities. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021, there was a change in fair value of derivative liabilities resulting in losses of approximately ~~$6,956,000~~$0 and ~~$0,~~$1,242,000, respectively. The loss in 2021 was ~~due to~~derived from the ~~resolution of outstanding~~Company’s total potentially dilutive shares ~~matter. The outstanding shares matter resulted in a reclassification of derivative liabilities to equity during~~exceed the ~~three months ended September 30, 2021.~~Company’s authorized share limit.

Gain on purchase of warrants. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, there was a gain of approximately ~~$64,000~~$0 and ~~$0,~~$64,000, respectively. The gain was related to the settlement of derivative liabilities which was the result of the repurchase of warrants from certain investors.

Warrant modification expense. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, warrant modification expense was approximately ~~$1,627,000~~$0 and ~~$0,~~$1,627,000, respectively. The warrant modification expense in 2021 was ~~due~~related to warrants held by a certain investor that were repriced. The investor was also granted new warrants to replace the ~~resolution of outstanding shares matter. The outstanding shares matter resulted in a reclassification of derivative liabilities to equity during the three months ended September 30, 2021.~~repriced warrants after they were exercised.

~~Tax~~Income tax expenses. For the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, tax expenses were ~~$87,000,~~$23,000 and ~~for the nine months ended September 20, 2020, tax benefits were $7,000.~~$17,000, respectively. The tax expense is computed by multiplying income before taxes at our Israeli subsidiary by the appropriate tax ~~rate. Tax expenses increased due to the expansion of our Israel operations.~~rate

Net loss. Our net loss ~~increased~~decreased by approximately ~~$8,488,000,~~$2,699,000, or ~~256%~~53%, to approximately ~~$11,808,000~~$2,434,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from approximately ~~$3,320,000~~$5,133,000 in the same period of ~~2020.~~2021. The ~~increase~~decrease in net loss resulted primarily from the factors described above.

We have incurred losses in the amount of approximately ~~$11,808,000~~$2,434,000 and had negative cash flow from operating activities of ~~$3,504,000~~$3,740,000 during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Although we expect to continue to incur losses and negative cash flows from operating activities through 2022, we had a cash balance of ~~$8,599,000~~just over $3,944,000 as of ~~September~~June 30, ~~2021. Therefore, we~~2022. The Company’s management believes that the Company does not have sufficient resources to fund our ~~operation~~operations for the next twelve months, ~~from~~thus, management has substantial doubt of the ~~date of this filing.~~Company’s ability to continue as a going concern. The Company 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 we ~~do not~~are unable to obtain stockholder ratification of certain prior issuances of our common stock and approval of an 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, the Company will be limited in its ability to raise additional capital.

During the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2021,~~2022, we ~~received approximately $4,968,000 of net proceeds~~met our short-term liquidity requirements from ~~the exercise of warrants.~~our existing cash reserves. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products, our development of future products and competing technological and market developments as well as our ability to overcome obstacles that may be presented due to developments caused by the coronavirus outbreak. We expect to continue to incur losses and negative ~~cash~~ flows from operations. We intend to use the proceeds generated from equity financings, or strategic alliances with third parties, either alone or in combination with equity financing to meet our short-term liquidity requirements as well as to advance our long-term plans. ~~While we~~We do not believe we have sufficient capital to execute our business plan over the next twelve months and there are no assurances that we will not need to raise additional capital ~~at a~~ later, ~~time,~~ or that we would be able to raise additional capital, if required, on terms favorable to us.

We do not have any material commitments to capital expenditures as of ~~September~~June 30, ~~2021,~~2022, and we are not aware of any material trends in capital resources that would impact our business.

As of June 30, 2022, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

As of ~~September~~June 30, ~~2021,~~2022, we had cash ~~and cash equivalents~~ of approximately ~~$8,599,000,~~$3,944,000, compared to approximately ~~$3,531,000~~$5,672,000 as of ~~September~~June 30, ~~2020.~~2021. We have historically met our cash needs through a combination of issuance of equity, borrowing activities and sales. Our cash requirements are generally for product development, research and development cost, marketing and sales activities, finance and administrative cost, capital expenditures and general working capital.

Cash used in our operating activities was approximately ~~$3,504,000~~$3,740,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~$2,073,000~~$2,870,000 for the same period in ~~2020.~~2021.

Cash provided by financing activities was ~~approximately $4,580,000~~$0 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$4,265,000~~$1,018,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~

As of September 30, 2021, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.2021.

We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment as well as issues that may continue to occur due to the development of the coronavirus outbreak. While there were significant delays in the production of goods due to COVID-19 issues, presently, we are no longer experiencing such delays in the production of our products. That said, there are no assurances that if subsequent waves of the pandemic occur that we will not experience significant delays ~~if another wave of~~in the ~~pandemic occurs.~~future. Our operating results could also be impacted by a weakening of the Euro and strengthening of the New Israeli Shekel (NIS), both against the U.S. dollar. ~~Lastly,~~Also, other economic conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products. Lastly, 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.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of ~~September~~June 30,~~, 2021,~~ 2022, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on their evaluation, as of the end of the period covered by this Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective because of the material weaknesses in our internal control over financial reporting as described in Item 9A in our Annual Report on Form 10-K for the fiscal ended December 31, ~~2020,~~2021, filed with the SEC on April 15, ~~2021.~~2022, as amended on May 2, 2022.

In addition to the previously existing material weaknesses described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, we identified another material weakness in our internal control over financial reporting in that we did not properly account for the number of shares of our common stock issued in connection with the conversion of shares of our preferred stock and the exercise of warrants, which resulted in the Company issuing more shares of common stock than are authorized under our governance documents (the “Overissuance Material Weakness”).

During 2020, management developed a remediation plan, whereby we implemented changes to our internal controls for these material weaknesses relating to (i) our controls over information technology and information systems relevant to the preparation of our financial statements, (ii) our controls over management review procedures for processing, recording and reviewing transactions related to certain contracts, accounting memos and certain monthly closing procedures, and (iii) our lack of a formalized written set of policies and procedures including testing documentation for our system of internal control over financial reporting (the “Existing Material Weaknesses”). Our remediation activities with respect to the Existing Material Weaknesses included: (a) expanded consultations with third party specialists on complex accounting matters, financial reporting and regulatory filings, (b) enhanced documentation to support a more precise review process, and (c) enhanced monitoring of the review process. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Although the Company has taken numerous steps with respect to the Existing Material Weaknesses, our remediation plan is not complete due to the lack of a written testing plan to conclude if our controls and procedures and management were operating effectively; and our remediation plan has not operated for a sufficient period of time for the Company to complete testing to conclude that our newly implemented controls and procedures were operating effectively as of September 30, 2021. In addition, in the third quarter of 2021, we were successful in the remediation of the Overissuance Material Weakness and have added compliance measures to monitor our issuance of securities prospectively.

Other than described above in this Item 4, there has been no change in our internal control over financial ~~reportinthat~~reporting that occurred during the ~~three months ended September 30, 2021~~last fiscal quarter to which this report relates that has materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.

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 million. As of the date of this report, the parties have respectively submitted the initial Request for Arbitration and Response to Request for Arbitration with Counterclaims, and agreed on a procedural timeline pursuant to which final resolution of the arbitration is expected by February 2022 (if not dismissed or settled earlier). The Company disputes the claims asserted by Protrade and intends to respond to the Request and defend against the claims vigorously.

On ~~December 17, 2019, a lawsuit was filed by a former officer and director, Jona Zumeris, in~~March 15, 2022, the ~~Haifa Israel District Financial Court, seeking damages of approximately $900,000 for breach of the Separation Agreement executed on July 4, 2018. The Israeli court~~arbitrator issued a ~~court order demanding~~final award, which, although denied all Protrade’s claims, nevertheless awarded Protrade about $1.5 million, on the grounds that ~~we restrict approximately $700,000 of the Company’s money until the matter is adjudicated. The Company appealed the court order and in February 2020,~~ the Company ~~agreed~~allegedly failed to ~~restrict approximately 1,187,000 NIS (“New Israeli Shekel”) and agreed to try to settle~~fulfill an order for reusable hydrogel patches placed after the ~~matter~~Agreement was terminated. The arbitrator based her decision on the basis of testimony of Protrade’s president who asserted that a patient would use in ~~mediation. On November 30, 2020, the Company funded the escrow account with $391,000. In January 2021, the parties reached a settlement in~~excess of 33 reusable patches per each device, which the Company ~~paid the plaintiff approximately $366,000 as settlement in full.~~believes is a grossly inflated number.

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, the Company submitted an application to the ICA seeking to correct an error in the award based on the evidence that the Company 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.

As of June 30, 2022 and 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”. No additional accrual was made in relation with the legal arbitration since the previous quarter.

There are no other material proceedings in which any of our directors, officers or affiliates or any registered or beneficial stockholder of more than 5% of our common stock, or any associate of any of the foregoing is an adverse party or has a material interest adverse to our interest.

The following description of risk factors includes any material changes to, and supersedes the description of, the risk factors addressed below associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, as filed with the SEC on April 15, ~~2021 and “Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021,~~2022, as ~~filed with the SEC~~amended on May ~~24, 2021.~~2, 2022. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price.

The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Form 10-Q. The following information should be read in conjunction with the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.

If we fail to comply with the continued listing requirements of the NASDAQ Capital Market, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted .

Our common stock is currently listed for trading on the NASDAQ Capital Market. We must satisfy NASDAQ’s continued listing requirements, including, among other things, a minimum closing bid price of $1.00 per share and a minimum stockholders’ equity of $2.5 million or risk delisting, which would have a material adverse effect on our business. A delisting of our common stock from the NASDAQ Capital Market could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.

On April 21, 2021, we received a notice from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market (the “Equity Requirement”). 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 did not otherwise satisfy the alternative criteria pertaining to market value of listed securities or net income. In accordance with the Nasdaq Listing Rules, the Company was granted a period of 45 calendar days, or through June 7, 2021, to submit its plan to evidence compliance with the Equity Requirement for the Staff’s review On May 24, 2021, the Company filed its Quarterly Report on Form 10-Q for the first quarter of 2021 and reported stockholders’ equity of approximately $4.3 million. On June 1, 2021, the Company was notified by Nasdaq that the Company regained compliance with Nasdaq’s listing qualifications and that this matter was now closed.

On June 17, 2021, the Company received a letter from the Listing Qualifications Department of the Nasdaq indicating that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business day period between May 5, 2021, through June 16, 2021, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until December 14, 2021 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq 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 the Company’s common stock was at least $1.00 for a minimum of 10 consecutive business days, Nasdaq would provide the Company with written confirmation that it had achieved compliance with the minimum bid price requirement.

There is no assurance we can maintain compliance with such minimum listing requirements. If our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.

~~If we fail to~~ maintain effective internal control over financial reporting, our business, financial condition or results of operations may be adversely affected.

As a public reporting company, we are required to establish and maintain effective internal control over financial reporting. Failure to establish such internal control, or any failure of such internal control once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of our internal control over financial reporting could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds.

Rules adopted by the Securities and Exchange Commission pursuant to Section 404 of Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting. The standards that must be met for management to assess the internal control over financial reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted. In addition, management’s assessment of internal control over financial reporting may identify weaknesses and conditions that need to be addressed in our internal control over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting (including those weaknesses identified in our periodic reports), or disclosure of management’s assessment of our internal control over financial reporting may have an adverse impact on the price of our securities.

As disclosed in Part II, Item 9A, “Controls and Procedures,” ~~of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,~~ we have identified material weaknesses in our internal control over financial reporting due to a lack of a full and complete testing of our disclosure controls and ~~procedures and separately related to the recent overissuance of shares of our common stock.~~procedures. We ~~have~~ concluded that our internal control over financial reporting and related disclosure controls and procedures were not effective as of December 31, ~~2020.~~2021. Our management ~~has implemented~~is in the process of implementing remediation measures with respect to the controls and written policies and procedures as described in Part II, Item 9A, “Controls and ~~Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020~~Procedures,” and management expects that such measures, once fully implemented, will be sufficient to ~~fully~~ remediate such material weaknesses in our internal control over financial ~~reporting. However, we have not implemented remediation measures with respect to the overissuance~~reporting that existed as of ~~shares of our common stock but expect to have a plan of remediation in place during the third quarter of~~December 31, 2021. While on August 17, 2021, the Company’s stockholders voted to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of the Company’s Common Stock authorized for issuance from 24,109,635 shares to 40,000,000 shares, we must address the policies and procedures that allowed such overissuance to occur and implement a remediation plan. We cannot guarantee that these steps will be sufficient to remediate the deficiencies or that we will not have a material weakness in the future. If our remedial measures are insufficient to address the material weakness or if additional material weaknesses arise in the future, our interim or annual financial statements may contain material misstatements or omissions and we could be required to restate our financial results.

Our common stock is currently listed for trading on the NASDAQ Capital Market. We must satisfy NASDAQ’s continued listing requirements, including, among other things, a minimum stockholders’ equity of $2.5 million and a minimum closing bid price of $1.00 per share or risk delisting, which would have a material adverse effect on our business. A delisting of our common stock from the NASDAQ Capital Market could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.

On March 2 2022, the Company received notice from the Listing Qualifications Staff of Nasdaq indicating that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business day period between January 14, 2022, through March 1, 2022, we did not meet the minimum bid price of $1.00 per share required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 555(a)(2). The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until August 29, 2022, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

There is no assurance that we can regain compliance with such minimum listing requirements. If our common stock were delisted from NASDAQ, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.

The Company’s financial statements have been prepared on a going concern basis, and do not include adjustments that might be necessary if the Company is unable to continue as a going concern. Management has substantial doubt about the Company’s ability to continue as a going concern.

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 first and second quarters of 2022, the Company’s cash used in operations was $3,740 leaving a cash balance of $3,944 as of June 30, 2022. Because the Company does not have sufficient resources to fund our operations for the next twelve months from the date of this filing, management has substantial doubt of the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company may need to raise additional capital to finance its 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. There are no assurances that the Company would be able to raise additional capital 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.

~~All~~On January 1, 2022 we entered into an International Marketing, Sales and Clinical Management Agreement (the “MTSG Agreement”) with MedTech Solutions Group, LLC (“MTSG”). Our Chairman of the Board, Christopher Fashek, is also the Chairman of MedTech. We appointed MTSG to provide international marketing, sales and clinical management expertise for commercialization of ~~unregistered~~our products in certain countries in Europe (excluding England, Scotland, Wales, Rep. of Ireland, Northern Ireland, Malta and Turkey), Africa, Asia, Central and South America, and North America (Excluding the United States and Canada) as well as Israel and Palestine.

The MTSG Agreement provides an incentive and reward to MTSG for meeting revenue targets set forth in the MTSG Agreement by allowing MTSG or its designees to be entitled to additional consideration in the form of annual grants of stock warrants at the Company’s discretion. On June 14, 2022, MTSG was awarded warrants for up to 250,000 shares of common stock, with an exercise price of $1.00 per share, that are exercisable at any time after the date that is six months from the date of issuance and expire at 5:00pm, New York time, on June 14, 2029.

These securities ~~during~~were issued in reliance upon exemptions from registration afforded by Section 4(a)(2) of the ~~three months ended September 30, 2021 were previously disclosed in a Current Report on Form 8-K.~~Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

525 Executive ~~Blvd.~~Blvd,. Elmsford, New York		10523
(Address of principal executive office)		(Zip Code)

Title of each class		Trading Symbol		Name of each exchange on which registered
Common stock, par value $0.001 per share		NAOV		NASDAQ Capital Market

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 (Unaudited) and December 31, ~~2020~~2021	1

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	2

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the ~~Three and Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	3

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	54

	Unaudited Notes to Condensed Consolidated Financial Statements	65

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2019

Item 4.	Controls and Procedures	2019

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2120

Item 1A.	Risk Factors	2221

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2523

Item 3.	Defaults Upon Senior Securities	2523

Item 4.	Mine Safety Disclosures	2523

Item 5.	Other Information	2523

Item 6.	Exhibits	2523

Signatures		2624

													2022			2021			2022			2021
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021

Revenues	$	499		$	150		$	920		$	533		$	485		$	318		$	757		$	421
Cost of revenues		271			51			407			345			204			110			370			136
Gross profit		228			99			513			188			281			208			387			285

Operating expenses:
Research and development		50			68			178			131			61			64			127			128
Selling and marketing		245			289			852			723			333			296			543			607
General and administrative		801			546			2,656			2,513			1,155			839			2,097			1,855

Total operating expenses		1,096			903			3,686			3,367			1,549			1,199			2,767			2,590

Loss from operations		(868	)		(804	)		(3,173	)		(3,179	)		(1,268	)		(991	)		(2,380	)		(2,305	)

Interest expense		-			(123	)		-			(123	)
Financial income (expense), net		(23	)		(15	)		(29	)		(25	)
Other income (expense), net														(18	)		1			(31	)		(6	)
Change in fair value of derivative liabilities		(5,714	)		-			(6,956	)		-			-			706			-			(1,242	)
Gain on purchase of warrants		-			-			64			-			-			64			-			64
Warrant modification expense		-			-			(1,627	)		-			-			-			-			(1,627	)

Loss before taxes on income		(6,605	)		(942	)		(11,721	)		(3,327	)		(1,286	)		(220	)		(2,411	)		(5,116	)

Income tax benefit / (expense)		(70	)		20			(87	)		7			(16	)		4			(23	)		(17	)

Net loss	$	(6,675	)	$	(922	)	$	(11,808	)	$	(3,320	)	$	(1,302	)	$	(216	)	$	(2,434	)	$	(5,133	)

Basic and diluted net loss available for holders of common stock, Series C Preferred Stock and Series D Preferred Stock	$	(0.26	)	$	(0.10	)	$	(0.47	)	$	(0.43	)
Basic and diluted net loss available for holders of common stock													$	(0.05	)	$	(0.01	)	$	(0.09	)	$	(0.21	)

Weighted average common shares outstanding:
Basic and diluted		26,096,957			9,344,254			25,014,919			7,649,242			27,997,793			24,776,302			27,997,793			24,476,551
Comprehensive loss:
Net loss available to common stockholders		(6,675	)		(922	)		(11,808	)		(3,320			(1,302	)		(216	)		(2,434	)		(5,133	)
Change in foreign currency translation adjustments		1			-			(7	)		-			(46	)		(14	)		(51	)		(8	)
Comprehensive loss available to common stockholders		(6,674	)		(922	)		(11,815	)		(3,320	)		(1,348	)		(230	)		(2,485	)		(5,141	)


	Series C Preferred Stock					Series D Preferred Stock					Series E Preferred Stock				Common Stock				Additional Paid - in			Accumulated			Total Stockholders’
	Shares			Amount		Shares			Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance, June 30, 2020		2,993,142		$	2		304		$	-		1,715,000		2		4,313,764	$	5	$	39,935	-	$	(40,728	)	$	(784	)
Stock-based compensation		-			-		-			-		-		-		-		-		183			-			183
Warrants issued with notes payable
Warrants issued with notes payable , shares
Issuance of common stock for services																375,000				567						567
Issuance of common stock for cash, net																6,326,217		7		4,216						4,223
Exercise of warrants
Exercise of warrants, shares
Conversion of preferred stock to common stock
Conversion of preferred stock to common stock, shares
Reclass from liability to equity
Other comprehensive loss
Exchange of Series C Preferred Stock into Common Stock		(487,890	)													487,890										-
Exchange of Series D Preferred Stock into Common Stock							(151	)								150,782										-
Exchange of Series E Preferred Stock into Common Stock		-			-		-			-		(840,000		-		840,000		-		-			-			-
Net loss		-			-		-			-		-		-		-		-		-	-		(922	)		(922	)
Balance, September 30, 2020		2,505,252		$	2		153		$	-		875,000	$	2		12,493,653	$	12	$	44,901	-	$	(41,650	)	$	3,267

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

	Series C Preferred Stock				Series D Preferred Stock				Series E Preferred Stock				Common Stock				Additional Paid - in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Income			Deficit			Equity
Balance, December 31, 2020		666,667	$	1		153	$	-		875,000	$	1		21,246,523	$	22	$	44,959	$	66		$	(42,655	)	$	2,394
Stock-based compensation		-		-		-		-		-		-		-		-		79		-			-			79
Exercise of warrants		-		-		-		-		-		-		2,863,111		2		3,492		-			-			3,494
Reclass from liability to equity		-		-		-		-		-		-		-		-		3,337		-			-			3,337
Other comprehensive loss		-		-		-		-		-		-		-		-		-		(7	)		-			(7	)
Net loss		-		-		-		-		-		-		-		-		-		-			(5,133	)		(5,133	)
Balance, June 30, 2021		666,667	$	1		153	$	-		875,000	$	1		24,109,634	$	24	$	51,867	$	59		$	(47,788	)	$	4,164

	Series C Preferred Stock				Series D Preferred Stock				Series E Preferred Stock				Common Stock				Additional Paid - in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Income			Deficit			Equity
Balance, March 31, 2022		-	$	-		-	$	-		-	$	-		27,997,793	$	28	$	63,248	$	54		$	(58,069	)	$	5,261
Stock-based compensation		-		-		-		-		-		-		-		-		83		-			-			83
Exercise of warrants		-		-		-		-		-		-		-		-		137		-			-			137
Other comprehensive loss		-		-		-		-		-		-		-		-		-		(45	)		-			(45	)
Net loss		-		-		-		-		-		-		-		-		-		-			(1,302	)		(1,302	)
Balance, June 30, 2022		-	$	-		-	$	-		-	$	-		27,997,793	$	28	$	63,468	$	9		$	(59,371	)	$	4,134

	2021			2020
	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(11,808	)	$	(3,320	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1			2
Noncash interest expense		-			123
Stock-based compensation		114			326
Warrants received as licensing fee		-			(23	)
Warrant modification expense		1,627			-
Change in fair value of equity investment		9			(4	)
Common stock payable to consultant		-			566
Change in fair value of derivative liabilities		7,148			-
Gain on purchase of warrants		(64	)		-
Changes in operating assets and liabilities:
Trade receivable		(4	)		8
Other accounts receivable and prepaid expenses		(330	)		107
Inventory		(56	)		12
Trade payables		(82	)		(46	)
Other accounts payable and accrued expenses		(294	)		(19	)
Deferred revenue		237			215
Accrued severance pay, net		(2	)		(20	)
Net cash used in operating activities		(3,504	)		(2,073	)

Cash flows from investing activities:
Purchases of property plant and equipment		(3	)		-
Net cash used in investing activities		(3	)		-

Cash flows from financing activities:
Proceeds from issuance of notes payable		-			42
Proceeds from note issued to related party		-			200
Payments of note payable to related party		-			(200	)
Proceeds from issuance of Preferred Series E stock		-			4,223
Proceeds from exercise of warrants		4,968			-
Buy back of warrants from investors		(388	)		-
Net cash provided by financing activities		4,580			4,265

Effects of currency translation on cash and cash equivalents		(7	)		-

Net increase in cash, cash equivalents and restricted cash		1,066			2,193
Cash, cash equivalents and restricted cash at beginning of period		7,533			1,338

Cash, cash equivalents and restricted cash at end of period	$	8,599		$	3,531

Supplemental non-cash financing and investing activities:
Discount on notes payable		-			123
Issuance of common stock payable	$	-		$	566
Conversion of Series C, D, and E Preferred stock into common stock	$	-		$	1
Shares issued from exercise of warrants previously classified as derivative liability	$	2,087		$	-
Reclassification liability to equity due to increase in authorized shares	$	10,963		$	-

Price at valuation	$	1.04
Exercise price	$	1.04
Risk free interest		0.49	%
Expected term (in years)		5
Volatility		81.5	%

~~Risk free interest~~	~~0.05~~ – ~~0.85~~	%
~~Dividend yield~~	0	%
~~Volatility~~	~~82.7% -~~ ~~211~~	%
~~Contractual term (in years)~~	~~0.67~~ – ~~6.56~~

~~Stock price~~Risk free interest	$	~~1.02~~ 1.44- ~~2.94~~3.49	%
~~Conversion price~~Dividend yield	$	~~0.72~~0	%
Volatility		137.7 - ~~6.90~~147.6	%
Contractual term (in years)		~~0.67~~ 0.34 - – ~~6.56~~6.96
~~Volatility (annual)~~		~~82.7% -~~ ~~211~~	%
~~Risk-free rate~~		~~0.09% -~~ ~~1.21~~	%

●	~~Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets;~~
●	~~Level 2 inputs: Inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly; and~~
●	~~Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.~~

	Derivative Liabilities
Balance – December 31, 2020	$	2,471
New issuances		1,819
Change in fair value of derivative liability		6,916
Reclassification liability to equity		(10,755	)
Buy back of warrants		(451	)
Balance – September 30, 2021	$	-


2021	$	3
2022		10
2023		10
Total undiscounted operating lease payments		23
Less: Imputed interest		3
Present value of operating lease liabilities	$	20

	September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021
Series D Preferred Stock		153		153,000		-		153,000
Series E Preferred Stock		-		875,000		-		875,000
Stock Options - employee and non-employee		1,914,699		1,693,332		2,659,999		1,914,699
Warrants		2,309,347		5,424,739		2,559,347		4,784,262
Total		4,224,199		8,146,071		5,219,346		7,726,961
Total		4,224,199		8,146,071

Price at valuation	$	0.12		$	0.08
Exercise price	$	0.19		$	0.19
Risk free interest		1.52	%		1.44	%
Expected term (in years)		9			8
Volatility		118.0	%		137.7	%

●	Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets;

●	Level 2 inputs: Inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly; and

●	Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

	Asset
Balance – December 31, 2020	$	25
Fair value adjustments – Sanuwave warrants		(2	)
Balance – March 31, 2021	$	23
Fair value adjustments – Sanuwave warrants		-
Balance – June 30, 2021	$	23

Balance – December 31, 2021		19
Fair value adjustments – Sanuwave warrants		(2	)
Balance – March 31, 2022	$	17
Beginning Balance	$	17
Fair value adjustments – Sanuwave warrants		(8	)
Balance – June 30, 2022	$	9
Ending Balance	$	9


	Fair Value Measurements as of June 30, 2022
	Level I		Level II		Level III		Total
Asset:
Other assets	$	-	$	-	$	9	$	9

	● ●	Our history of losses and expectation of continued losses. Management believes that the Company does not have sufficient resources to fund our operations for the next twelve months, thus, management has substantial doubt of the Company’s ability to continue as a going concern.
	●	Global economic and political instability and conflicts, such as the conflict between Russia and Ukraine, could adversely affect our business, financial condition or results of operations.
	●	Increasing inflation could adversely affect our business, financial condition, results of operations or cash flows.
	●	The geographic, social and economic impact of COVID-19 on the Company’s business operations.
	●	Our ability to raise funding for, and the timing of, clinical studies and eventual U.S. Food and Drug Administration approval of our product candidates.
	●	~~The risk that we may not obtain the requisite votes at our annual meeting to increase the number of authorized shares of common stock.~~
	●	Regulatory actions that could adversely affect the price of or demand for our approved products.
	●	Market acceptance of existing and new products.
	●	Favorable or unfavorable decisions about our products from government regulators, insurance companies or other third-party payers.
	●	Risks of product liability claims and the availability of insurance.
	●	Our ability to successfully develop and commercialize our products.
	●	Our ability to generate internal growth.
	●	Risks related to computer system failures and cyber-attacks.
	●	Our ability to obtain regulatory approval in foreign jurisdictions.
	●	Uncertainty regarding the success of our clinical trials for our products in development.
	●	Risks related to our operations in Israel, including political, economic and military instability.
	●	The price of our securities is volatile with limited trading ~~volume.~~volume
	●	Our ability to ~~comply~~regain and maintain compliance with the continued listing requirements of the NASDAQ ~~capital market.~~Capital Market.
	●	Our ability to maintain effective internal control over financial reporting and to remedy identified material weaknesses.
	●	We are a “smaller reporting company” and have reduced disclosure obligations that may make our stock less attractive to investors.
	●	Our intellectual property portfolio and our ability to protect our intellectual property rights.
	●	Our ability to recruit and retain qualified regulatory and research and development personnel.
	●	Unforeseen changes in healthcare reimbursement for any of our approved products.
	●	The adoption of health policy changes and health care reform.
	●	Lack of financial resources to adequately support our operations.
	●	Difficulties in maintaining commercial scale manufacturing capacity and capability.
	●	Our ability to generate internal growth.
	●	Changes in our relationship with key collaborators.
	●	Changes in the market valuation or earnings of our competitors or companies viewed as similar to us.
	●	Our failure to comply with regulatory guidelines.
	●	Uncertainty in industry demand and patient wellness behavior.
	●	General economic conditions and market conditions in the medical device industry.
	●	~~Risks related to our operations in Israel.~~
	●	Future sales of large blocks of our common stock, which may adversely impact our stock price.
	●	Depth of the trading market in our common stock.

Exhibit No.		Description
~~3.1~~3.1*		~~Amended and Restated~~ Certificate of ~~Incorporation (as presently in effect) (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 17, 2015)~~
~~3.2~~		~~Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Amendment No. 3 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 30, 2014)~~
~~3.3~~		~~Certificate~~Validation of Amendment of Certificate of Incorporation (creating the Series C Preferred Stock) (incorporated by reference to Exhibit 3.3 to Amendment No. 3 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 30, 2014)
~~3.4~~		Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on November 7, 2017)
~~3.5~~		Certificate of Designation, Preferences, Rights and Limitations of Series E Preferred Stock (incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 19, 2019)
~~3.6~~		Certificate of Amendment of the Amended and Restated Certificate of Designation (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2019)
3.7*		~~Certificate of Amendment of Certificate of Incorporation (increasing the number of shares of common stock authorized for issuance)~~NanoVibronix, Inc.
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101101 INS 101 SCH* 101 CAL* 101 DEF* 101 LAB* 101 PRE* 104*		~~The following materials from the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2021, formatted in~~ Inline XBRL (eXtensible Business Reporting Language), (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Loss, (iii) Consolidated Statements of Changes in Equity (Deficiency) (iv) Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial StatementsInstance Document
~~104~~		~~The cover page from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in~~ Inline XBRL ~~and contained in Exhibit 101.~~Taxonomy Extension Schema Document Inline XBRL Taxonomy Calculation Linkbase Document Inline XBRL Taxonomy Extension Definition Linkbase Document Inline XBRL Taxonomy Labels Linkbase Document Inline XBRL Taxonomy Presentation Linkbase Document Cover Page Interactive Data File (embedded within the Inline XBRL document)

Date: ~~November 15, 2021~~August 11, 2022	By:	/s/ Brian Murphy
	Name:	Brian Murphy, Ph.D.
	Title:	Chief Executive Officer

Date: ~~November 15, 2021~~August 11, 2022	By:	/s/ Stephen Brown
	Name:	Stephen Brown
	Title:	Chief Financial Officer