📃 What This Document Is 📄

This filing is an Inducement Letter (and related Warrant Agreement), which is a highly technical legal document. It does not report on the company's earnings; instead, it outlines a specialized, pre-arranged deal aimed at encouraging existing warrant holders to exercise their rights. Think of it as a structured incentive program for investors holding warrants, designed to boost liquidity and capital for Wearable Devices Ltd.

👉 Why it matters: This letter changes the terms under which investors can exercise their old warrants, offering new incentives to make them sell shares, providing the company with cash.

🌐 Wearable Devices Ltd. Overview ⚙️

While the document does not provide a full business overview, it confirms that Wearable Devices Ltd. is a company based in Yokne-am Illit, Israel. It operates in the wearable device industry, which is crucial for its overall valuation and capital raising efforts.

👉 In simple terms: The company is utilizing its existing shareholder capital structure (warrants) to raise cash and support its operations in the tech sector.

✨ The Inducement Offer Mechanics ✨

The core of the document is the "Inducement Offer." The company is offering the warrant holder a new set of warrants (the "New Warrants") in exchange for exercising their older warrants (the "Existing Warrants"). This is the "inducement" mechanism, where the company sweetens the deal to get the shares to the market.

• The Exchange: The company offers the holder the right to receive unregistered warrants to buy up to 5,082,873 New Warrant Shares. This number is exactly 175% of the total ordinary shares issuable upon exercise of the Existing Warrants (which total up to 2,904,499 Ordinary Shares).
• The Timing: This special offer is available during the Exercise Period, which runs from the date of the letter until 12:00 p.m. Eastern Time, on April 20, 2026.
• The Incentive: By accepting this offer, the company is lowering the initial exercise price for the Existing Warrants to $1.73 per share.

💰 Warrant Shares and Pricing 🔢

The document meticulously outlines the prices for both the old and new warrants, which is critical for determining the ultimate economics for the holder.

• Existing Warrants: The initial exercise price for the Existing Warrants is being reduced to $1.73 per share. This reduced price includes a payment of $0.125 per New Warrant Share.
• New Warrants: In return for the exercise, the company offers New Warrants that are exercisable at $1.51 per share. These New Warrants have a term of five (5) years from the date of issuance.

👉 Why it matters: The structure means the holder gets a significant proportional increase in warrants (175%) while also getting a price incentive, making the overall transaction more attractive than simply exercising the original warrants.

🔒 Restrictions and Ownership Limits 📐

To protect the company and its shareholders, the deal comes with strict limitations on how many shares can be owned, known as "Beneficial Ownership Limitations."

• Limitation: The existing warrants and new warrants are subject to a Beneficial Ownership Limitation of 4.99% or 9.99% of the Ordinary Shares.
• The Rule: This limitation ensures that no single holder (or related group) can gain control of the company by owning too large a percentage of shares. The highest allowable ownership before the limit is reached is 24.99%.
• Compliance: The holder must represent that it is an "accredited investor" and that it is acquiring the warrants as principal for its own account, without any arrangement to distribute them to others.

🛡️ Legal Protections and Representations ⚖️

The letter includes several sections where the company guarantees certain facts, which shields the holder from future legal claims related to the transaction.

• SEC Reporting: The company represents that it has filed all required SEC reports for the two years preceding the date of the letter, and that these reports contained no untrue material facts or omissions.
• Compliance: The company confirms it has the requisite corporate power and authority to enter into this agreement and that it does not violate its charter or any material agreements.
• Trading Market: The transactions comply with all rules of the Nasdaq Capital Market.
• Blue Sky Filings: The company commits to taking necessary action to qualify the New Warrants under applicable state "Blue Sky" laws, allowing the shares to be legally sold across different US states.

🌐 Major Corporate Events and Clauses 🚀

The agreement addresses complex, future-looking events—especially major corporate changes—to ensure the warrants retain their value even if the company changes hands.

• Fundamental Transactions: This term covers major corporate events like mergers, sales of all assets, tender offers, or re-organizations. If one happens, the warrant holders' rights are preserved.
• Alternate Consideration: In the event of a Fundamental Transaction, the holder gets to receive an amount of "Alternate Consideration" (cash, stock, or property) that reflects the value they would have received had they held the shares at the time of the transaction.
• Redemption Right: If a Fundamental Transaction occurs, the company (or successor) has the option to redeem the remaining warrants by paying the holder an amount equal to the Black Scholes Value. This is a complex financial calculation used to estimate the intrinsic value of the warrant at the time of the sale.

⚠️ Rules on Company Operations 🛑

The agreement dictates several limitations on the company's activities until the deal closes, providing stability and limiting risk for the holder.

• Sales Prohibition: Until thirty (30) calendar days following the letter date, the company is generally prohibited from issuing any Ordinary Shares or filing any registration statement, with limited exceptions (like employee stock grants or the specific ATM Sales Agreement with A.G.P./Alliance Global Partners).
• Variable Rate Transactions: Similarly, the company is prohibited from entering into any "Variable Rate Transaction" for that same 30-day period.
• Confidentiality: Upon the official filing of a press release, the company acknowledges that all prior confidentiality obligations between the company and the holder terminate.

📅 Finalization and Next Steps 🏁

The document outlines the mechanics required to finalize the transaction, ensuring that if the holder exercises their warrants, the shares are delivered smoothly.

• Filing Requirements: The company must file a Resale Registration Statement on Form F-1 (the “Resale Registration Statement”) for the New Warrant Shares within thirty (30) calendar days, and use commercially reasonable efforts to make this statement effective within sixty (60) calendar days.
• Closing Mechanics: The exercise of the Existing Warrants and the final issuance of the Warrant Shares shall occur via "Delivery Versus Payment" (DVP), meaning the shares are issued and paid for simultaneously through the Financial Advisor.
• Governing Law: All questions concerning the agreement will be governed by the internal laws of the State of New York.

🧠 The Analogy 📚

Think of this Inducement Offer like a massive, deeply discounted car trade-in. You (the Holder) have an old car (the Existing Warrants) that you want to sell. The company (Wearable Devices Ltd.) says, "We'll make this trade much easier for you today." Instead of just accepting the old cash price, they give you a huge bonus bundle of new, superior warrants (the New Warrants) which increases your total value, while also lowering the price you pay upfront. It's a carefully engineered deal to make sure you happily sell your old assets to us.

🧩 Final Takeaway 💡

This document is an advanced financial incentive agreement that significantly boosts the value of existing warrants for the holder. It offers a massive increase in warrant shares (175%) and a reduced price per share, contingent upon the holder exercising all existing rights by April 20, 2026.