[Full Year 2023 Financial Results and Corporate Update](index=1&type=section&id=Full%20Year%202023%20Financial%20Results%20and%20Corporate%20Update) [Corporate Update and CEO's Remarks](index=1&type=section&id=Corporate%20Update%20and%20CEO%27s%20Remarks) In 2023, Wearable Devices focused on strategic capital allocation, leading to an increased net loss due to investments in sales, marketing, and R&D. Key achievements included the first shipment of the Mudra Band for Apple Watch and establishing significant B2B partnerships, such as with Qualcomm and a major defense contractor. The company is advancing both its B2B offerings with the Mudra Developer Kit (MDK) and its B2C product, the Mudra Band, and anticipates a transformative year in 2024 with a focus on increasing production and market presence - The net loss increased in 2023 due to strategic investments in sales & marketing and research & development to support innovation and business development[3](index=3&type=chunk) - The company successfully completed the delivery of its first manufacturing batch of the B2C Mudra Band for Apple Watch to preorder customers[3](index=3&type=chunk)[5](index=5&type=chunk) - B2B partnerships are a key part of the growth strategy, highlighted by the launch of the Mudra Developer Kit (MDK) and collaboration agreements with Qualcomm and a leading global defense company[4](index=4&type=chunk) - The company is intently focused on increasing production capacity to meet the anticipated demand for the Mudra Band[5](index=5&type=chunk) [2023 and Recent Business Highlights](index=2&type=section&id=2023%20and%20Recent%20Business%20Highlights) Throughout 2023 and into early 2024, the company achieved significant operational milestones, including signing a collaboration with Qualcomm, launching the B2B Mudra Developer Kit (MDK), delivering the first batch of Mudra Bands, and expanding its U.S. presence with a Silicon Valley office, while also advancing its technology by filing a patent for pinch-to-zoom and introducing spatial depth control - Signed a collaboration agreement with Qualcomm to enhance XR experiences and received a purchase order for the MDK from a leading Japanese industrial automation company[9](index=9&type=chunk) - Successfully delivered the first manufacturing batch of the Mudra Band for Apple Watch[9](index=9&type=chunk) - Opened a new office in Silicon Valley to expand its U.S. presence and foster relationships in the tech market[9](index=9&type=chunk) - Filed a U.S. patent application for touchless pinch-to-zoom technology for AR/VR and introduced a new spatial depth control feature[9](index=9&type=chunk) [Full Year 2023 Financial Highlights](index=2&type=section&id=Full%20Year%202023%20Financial%20Highlights) For the full year 2023, Wearable Devices experienced significant growth in operating expenses, with R&D costs rising **46% to $3.3 million** and Sales & Marketing expenses increasing **47% to $2.0 million**, leading to a wider net loss of **$7.8 million** from **$6.5 million** in 2022, ending the year with **$4.9 million** in cash and deposits and **$1.0 million** in inventory to support planned B2C business growth Full Year 2023 Key Financial Metrics | Metric | FY 2023 | FY 2022 | Change | | :--- | :--- | :--- | :--- | | Research and Development Expenses | $3.3 million | ~$2.3 million | +46% | | Sales and Marketing Expenses | $2.0 million | ~$1.4 million | +47% | | Net Loss | $(7.8 million) | $(6.5 million) | Increased Loss | | Net Loss per Diluted Share | $(0.48) | $(0.53) | - | | Cash and Deposits (at Dec 31, 2023) | $4.9 million | N/A | N/A | | Inventory (at Dec 31, 2023) | $1.0 million | N/A | N/A | [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for the year ended December 31, 2023, reflect a period of heavy investment, with total assets decreasing to **$7.6 million** from **$11.2 million** in 2022 due to a reduction in cash, a widened net loss of **$7.8 million** from **$6.5 million** in the prior year due to increased R&D and S&M spending, and an increased use of cash from operations at **$8.4 million** [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of December 31, 2023, the company's total assets stood at **$7.6 million**, down from **$11.2 million** in 2022, primarily due to a significant decrease in cash and cash equivalents, while total liabilities increased to **$2.1 million** from **$1.2 million**, and inventory substantially increased to over **$1.0 million** from **$6 thousand** in 2022, reflecting the transition to production Consolidated Balance Sheet Data (in thousands USD) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | **$6,752** | **$10,976** | | Cash and cash equivalents | $810 | $10,373 | | Inventories | $1,032 | $6 | | **Total Assets** | **$7,592** | **$11,224** | | **Total Liabilities** | **$2,066** | **$1,244** | | **Total Shareholders' Equity** | **$5,526** | **$9,980** | [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20LOSS) For the fiscal year 2023, the company generated revenues of **$82 thousand** and reported a net loss of **$7.8 million**, or **($0.48)** per share, representing a larger loss compared to the **$6.5 million** net loss, or **($0.53)** per share, in 2022, primarily driven by higher operating expenses, including a **46%** rise in R&D and a **47%** rise in sales and marketing costs Statement of Comprehensive Loss (in thousands USD, except per share amounts) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues | $82 | $45 | $142 | | Research and development, net | $(3,316) | $(2,271) | $(1,411) | | Sales and marketing expenses, net | $(2,008) | $(1,370) | $(665) | | **Operating Loss** | **$(8,186)** | **$(6,458)** | **$(2,669)** | | **Net Loss** | **$(7,814)** | **$(6,496)** | **$(2,614)** | | Net loss per ordinary share, diluted | $(0.48) | $(0.53) | $(0.27) | [Consolidated Statements of Cash Flows](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) In 2023, net cash used in operating activities was **$8.4 million**, a significant increase from **$5.7 million** in 2022, while investing activities used **$4.2 million** primarily for bank deposits, and financing activities provided **$3.1 million** from share issuances and warrant exercises, resulting in a **$9.6 million** decrease in cash and cash equivalents, ending the year at **$810 thousand** Statement of Cash Flows Highlights (in thousands USD) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,434) | $(5,714) | | Net cash used in investing activities | $(4,248) | $(66) | | Net cash provided by financing activities | $3,119 | $14,879 | | **Net (decrease) increase in cash** | **$(9,563)** | **$9,099** | | **Cash and cash equivalents at end of year** | **$810** | **$10,373** |

[Financial Statements](index=2&type=section&id=Financial%20Statements) This section presents the interim condensed consolidated financial statements and their accompanying notes for Wearable Devices Ltd [Interim Condensed Consolidated Balance Sheets](index=2&type=section&id=Interim%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2023, reflects a decrease in total assets and shareholders' equity, primarily due to reduced cash and accumulated losses, alongside an increase in total liabilities Consolidated Balance Sheet Summary (in thousands USD) | Account | June 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $5,954 | $10,373 | ($4,419) | | Total Current Assets | $8,689 | $10,976 | ($2,287) | | Total Assets | $9,369 | $11,224 | ($1,855) | | **Liabilities & Equity** | | | | | Total Current Liabilities | $1,526 | $1,150 | $376 | | Total Liabilities | $1,728 | $1,244 | $484 | | Accumulated losses | ($17,305) | ($13,409) | ($3,896) | | Total Shareholders' Equity | $7,641 | $9,980 | ($2,339) | | Total Liabilities and Equity | $9,369 | $11,224 | ($1,855) | [Interim Condensed Consolidated Statements of Comprehensive Loss](index=4&type=section&id=Interim%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) For the six months ended June 30, 2023, the company reported a net loss of **$3.90 million**, significantly higher than the **$2.05 million** loss in the prior year, driven by decreased revenues and increased operating expenses Statement of Comprehensive Loss Summary (in thousands USD, except per share data) | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :--- | :--- | :--- | | Revenues | $12 | $28 | | Research and development, net | ($1,560) | ($944) | | Sales and marketing expenses | ($1,050) | ($471) | | General and administrative expenses | ($1,453) | ($587) | | **Operating Loss** | **($4,054)** | **($2,053)** | | **Comprehensive and Net Loss** | **($3,896)** | **($2,051)** | | Net loss per ordinary share | ($0.26) | ($0.18) | [Interim Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficit)](index=5&type=section&id=Interim%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20%28Deficit%29) Shareholders' equity decreased to **$7.64 million** by June 30, 2023, from **$9.98 million** at year-end 2022, primarily due to a comprehensive loss, partially offset by option exercises and share-based compensation - Total shareholders' equity decreased by **$2.34 million** during the first six months of 2023[10](index=10&type=chunk) Changes in Shareholders' Equity (in thousands USD) | Description | Amount | | :--- | :--- | | Balance as of Dec 31, 2022 | $9,980 | | Exercise of options | $1,448 | | Share based compensation | $109 | | Comprehensive loss | ($3,896) | | **Balance as of June 30, 2023** | **$7,641** | [Interim Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Interim%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, the company experienced a net decrease in cash of **$4.42 million**, driven by significant cash usage in operating and investing activities, partially offset by financing inflows Cash Flow Summary (in thousands USD) | Category | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,719) | ($1,439) | | Net cash used in investing activities | ($2,148) | ($15) | | Net cash provided by financing activities | $1,448 | $500 | | **Net Decrease in Cash** | **($4,419)** | **($954)** | | Cash at beginning of period | $10,373 | $1,274 | | **Cash at end of period** | **$5,954** | **$320** | [Notes to the Interim Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context on the company's business, accounting policies, and significant events, including its going concern status, related-party transactions, equity changes, and recent operational developments [NOTE 1 – GENERAL](index=7&type=section&id=NOTE%201%20%E2%80%93%20GENERAL) This note outlines Wearable Devices Ltd.'s business as a developer of human-machine interface solutions and highlights substantial doubt about its going concern ability due to accumulated losses and funding dependency - The company is in the development stage, focusing on human-machine interface solutions for the smart wearables industry[13](index=13&type=chunk) - The company's dependency on external funding and its accumulated losses of **$17.3 million** raise substantial doubt about its ability to continue as a going concern[14](index=14&type=chunk)[17](index=17&type=chunk) [NOTE 2 – BASIS FOR PREPARATION](index=7&type=section&id=NOTE%202%20%E2%80%93%20BASIS%20FOR%20PREPARATION) These unaudited interim financial statements are prepared in accordance with U.S. GAAP for interim reporting, with no significant changes to accounting policies during the period - Financial statements are prepared according to U.S. GAAP for interim reporting and do not include all disclosures required for complete annual statements[15](index=15&type=chunk) [NOTE 3 – RELATED PARTIES](index=8&type=section&id=NOTE%203%20%E2%80%93%20RELATED%20PARTIES) Employment expenses for the company's co-founders significantly increased to **$174 thousand** for the first half of 2023, up from **$71 thousand** in the prior year period - Employment expenses for the three co-founders totaled **$174 thousand** for the first six months of 2023, compared to **$71 thousand** for the same period in 2022[18](index=18&type=chunk) [NOTE 4 – EQUITY](index=8&type=section&id=NOTE%204%20%E2%80%93%20EQUITY) This note details the company's equity structure, including warrant exercises, outstanding options, and new option grants to employees and consultants during the reporting period - In June 2023, **724,139** warrants were exercised, generating proceeds at an exercise price of **$2.00** per share[21](index=21&type=chunk) - As of June 30, 2023, **1,053,264** options were outstanding for employees under the 2015 Share Option Plan[24](index=24&type=chunk) - In the first half of 2023, the company granted **65,000** options to new employees and **100,000** options to a consultant[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE 5 – SIGNIFICANT EVENTS IN THE REPORTING PERIOD](index=10&type=section&id=NOTE%205%20%E2%80%93%20SIGNIFICANT%20EVENTS%20IN%20THE%20REPORTING%20PERIOD) Significant events include a new lease agreement, a development program with the Israeli Innovation Authority for approximately **$900 thousand**, and regaining Nasdaq minimum bid price compliance - The Israeli Innovation Authority approved a program to finance **60%** of a **~$900 thousand** project for the company's manufacturing process development[29](index=29&type=chunk) - On June 9, 2023, the company regained compliance with the Nasdaq minimum bid price requirement[29](index=29&type=chunk) [NOTE 6 – SUBSEQUENT EVENTS](index=10&type=section&id=NOTE%206%20%E2%80%93%20SUBSEQUENT%20EVENTS) Subsequent events include the Board's approval on August 23, 2023, to grant **406,500** new options and increase the shares available under the 2015 Share Option Plan by **931,139** - On August 23, 2023, the Board approved granting **406,500** new options at an exercise price of **$1.32** per share[29](index=29&type=chunk) - The Board increased the number of shares available for grant under the 2015 Share Option Plan by **931,139**[29](index=29&type=chunk)

FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Israel (Jurisdiction of incorporation or organization) 5 Ha-Tnufa Street Yokne'a ...

[2022 Financial Results and Business Update](index=1&type=section&id=2022%20Financial%20Results%20and%20Business%20Update) Wearable Devices reported a wider net loss in 2022, driven by strategic investments and IPO expenses, while significantly strengthening its cash position and advancing neural interface technology [Financial Performance](index=1&type=section&id=Financial%20Performance) Wearable Devices' 2022 financial performance saw a widened net loss to **$6.5 million** from **$2.6 million** in 2021, driven by increased operating expenses and IPO costs, despite a substantial increase in cash to **$10.4 million** from IPO proceeds Key Financial Metrics (in thousands USD, except per share data) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Revenues | $45 | $142 | | Net Loss | $(6,496) | $(2,614) | | Net Loss Per Share (diluted) | $(0.53) | $(0.27) | | Cash Balance (Year-End) | $10,400 | $1,300 | [Statement of Comprehensive Loss](index=4&type=section&id=Statement%20of%20Comprehensive%20Loss) The company's net loss significantly widened to **$6.5 million** in 2022, primarily due to increased operating expenses across R&D, sales, and general administration, alongside one-time IPO costs, while revenues declined Consolidated Statements of Comprehensive Loss (in thousands USD) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Revenues | $45 | $142 | | Research and development, net | $(2,271) | $(1,411) | | Sales and marketing expenses, net | $(1,370) | $(665) | | General and administrative expenses | $(1,948) | $(628) | | Initial public offering expenses | $(904) | $(97) | | **OPERATING LOSS** | **$(6,458)** | **$(2,669)** | | **COMPREHENSIVE AND NET LOSS** | **$(6,496)** | **$(2,614)** | [Balance Sheet](index=3&type=section&id=Balance%20Sheet) As of December 31, 2022, the company's balance sheet significantly strengthened post-IPO, with total assets growing to **$11.2 million** and cash to **$10.4 million**, substantially increasing shareholders' equity to **$10.0 million** Consolidated Balance Sheet Highlights (in thousands USD) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,373 | $1,274 | | **TOTAL ASSETS** | **$11,224** | **$1,445** | | **TOTAL LIABILITIES** | **$1,244** | **$638** | | **TOTAL SHAREHOLDERS' EQUITY** | **$9,980** | **$807** | [Statement of Cash Flows](index=5&type=section&id=Statement%20of%20Cash%20Flows) In 2022, increased cash usage in operations was significantly offset by **$14.9 million** in net cash from financing activities, primarily from **$14.3 million** in IPO proceeds, resulting in a **$9.1 million** net cash increase Consolidated Cash Flow Highlights (in thousands USD) | Cash Flow Source | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,714) | $(2,103) | | Net cash used in investing activities | $(66) | $(36) | | Net cash provided by financing activities | $14,879 | $2,938 | | **Net increase in cash** | **$9,099** | **$799** | - The primary source of financing cash flow in 2022 was the **$14.3 million** net proceeds from the issuance of ordinary shares and warrants in connection with the initial public offering[12](index=12&type=chunk) [Business and Operational Highlights](index=1&type=section&id=Business%20and%20Operational%20Highlights) The company is strategically investing in neural interface technology for AI and Metaverse markets, pursuing a dual B2B and B2C strategy with early traction for 'Mudra Inspire' and 'Mudra Band', and securing key post-year-end partnerships and grants - The company's vision is to make the user's hand a **universal input device** for touchless interaction, targeting the AI and Metaverse markets[5](index=5&type=chunk)[7](index=7&type=chunk) - The CEO stated that the **increased net loss** is a result of **strategic investments** in R&D to refine technology, with the expectation of driving future shareholder returns[5](index=5&type=chunk) - The CEO believes **2023 is positioned to be a transformative year** for the company as it continues to showcase its technology and bring products to market[5](index=5&type=chunk) [Business-to-Business (B2B) Operations](index=1&type=section&id=Business-to-Business%20%28B2B%29%20Operations) The company's B2B strategy, centered on the 'Mudra Inspire' development kit, has gained early traction with **over 100 companies** across diverse sectors, indicating a broad addressable market - The 'Mudra Inspire' development kit has been purchased by **over 100 companies**, indicating strong initial interest in the B2B market[5](index=5&type=chunk) - Customers for the development kit span a wide range of industries, including consumer electronics manufacturers, IT services, software development, industrial companies, and utility providers[5](index=5&type=chunk) [Business-to-Consumer (B2C) Operations](index=1&type=section&id=Business-to-Consumer%20%28B2C%29%20Operations) The B2C focus is the 'Mudra Band' for Apple Watch, which has garnered considerable interest through robust preorder activity and recently introduced the 'Mudra Air-Touch' AI feature for seamless device control - The 'Mudra Band' for the Apple Watch is the company's flagship B2C product, showing considerable interest through **robust preorder activity**[5](index=5&type=chunk) - A new feature, 'Mudra Air-Touch', has been introduced to allow users to toggle and switch between connected Apple devices, enhancing the user experience[5](index=5&type=chunk) [Financing Activities and Subsequent Events](index=1&type=section&id=Financing%20Activities%20and%20Subsequent%20Events) In September 2022, the company closed its IPO, raising approximately **$16 million** in gross proceeds, and subsequently secured a strategic partnership with a Fortune 500 company and a **$900,000 grant** for manufacturing advancement - In September 2022, the company closed its IPO, raising gross proceeds of approximately **$16 million** before expenses[5](index=5&type=chunk) - Post year-end, the company entered a **strategic partnership** with a Fortune 500 communications equipment company to embed Mudra technology into the partner's chipset[6](index=6&type=chunk) - Received a **$900,000 grant** from the Israel Innovation Authority to finance further development of the 'Mudra Band' manufacturing process[6](index=6&type=chunk)