NanoVibronix, Inc.

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

On April 6, 2021, the Company agreed to purchase 663,332 warrants from investors for a total of $388. The warrants had exercise prices between $0.88 and $0.94 per share.

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

On April 21, 2021, the Company received notice from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company no longer satisfied the minimum $2.5 million stockholders’ equity requirement for continued listing on 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 for the fiscal year ended December 31, 2020 and does not otherwise satisfy the alternative criteria pertaining to market value of listed securities or net income. In accordance with the Nasdaq Listing Rules, the Company has been 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. If the Company’s plan is accepted, the Staff may grant the Company an extension of up to 180 calendar days from the date of the notification letter, or October 18, 2021, to evidence compliance with the Equity Requirement. While the Company is evaluating various courses of action in its effort to regain compliance with the Equity Requirement and plans to timely submit a compliance plan to the Staff for its review, there can be no assurance that the Company’s plan will be accepted by the Staff or, if accepted, that the Company will be able to timely satisfy the terms of the extension granted by the Staff. If the Company’s plan is not accepted by the Staff or if accepted but the Company does not timely regain compliance, the Company’s common stock would be subject to delisting. In such event, the Company would be entitled to request a hearing before a Nasdaq Hearings Panel, which request would stay any delisting action by Nasdaq at least until the ultimate conclusion of the hearing process.

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 March 31, 2021. In addition, we expect to have a plan in place by the end of the second quarter of 2021 with respect to the remediation of our Overissuance Material Weakness.

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 does 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 has been 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. If the Company’s plan is accepted, the Staff may grant the Company an extension of up to 180 calendar days from the date of the notification letter, or October 18, 2021, to evidence compliance with the Equity Requirement. While the Company is evaluating various courses of action in its effort to regain compliance with the Equity Requirement and plans to timely submit a compliance plan to the Staff for its review, there can be no assurance that the Company’s plan will be accepted by the Staff or, if accepted, that the Company will be able to timely satisfy the terms of the extension granted by the Staff. If the Company’s plan is not accepted by the Staff or if accepted but the Company does not timely regain compliance, the Company’s common stock would be subject to delisting. In such event, the Company would be entitled to request a hearing before a Nasdaq Hearings Panel, which request would stay any delisting action by Nasdaq at least until the ultimate conclusion of the hearing process.