Company: SATT
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001683168-25-002119
Chunk: 659

Company: SATIVUS TECH CORP.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 8
Chunk 659
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 prepared to assume that the Company will continue as a going concern, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. We have identified the Going Concern as a critical audit
matter because of the significant estimates and assumptions made by management. This required a high degree of auditor judgment and
an increased extent of effort when performing audit procedures to evaluate the reasonableness of the Company’s assessment of
Going Concern. See the explanatory paragraph of the opinion paragraph.

How the Critical Audit Matter was addressed in
our Audit

The primary procedures we performed to address
this critical audit matter included the following: (i) We evaluate whether there is substantial doubt about the entity’s ability
to continue as a going concern for a reasonable period of time. (ii) We obtained information about management’s plans that are intended
to mitigate the effect of such conditions or events and assess the likelihood that such plans can be effectively implemented. (iii) We
added an explanatory paragraph to the audit report.

Evaluation of convertible debt with an embedded
derivative liability and detachable warrants

Critical audit matter description

As discussed in Notes 2 and 3 to the financial
statements, upon initial recognition of Convertible loans, Convertible Notes, similar instruments issued with or without detachable warrants,
the Company considers whether the embedded feature within the convertible instruments should be separated from the host instrument and
the manner of its presentation and future measurement and weather warrants granted by the Company to lenders through convertible bridge
loans and stock warrants transactions should be classified as a component of permanent equity or as derivative liabilities. The Company
utilized a Monte Carlo model to value the derivative bifurcated liabilities, which estimates the fair value of the liabilities based upon
certain assumptions utilizing a probability-weighted analysis of certain future events. Other inputs into the model include volatility,
closing stock prices at various valuation points, and conversion prices as determined by the applicable agreements.

We identified the fair value of the derivative
liability as a critical audit matter, as (i) the assumptions utilized in the model to value the derivative liability required judgment,
and the model is inherently complex. (ii) the accounting for derivative liabilities is complex (iii) the magnitude of the liabilities
and losses recognized in the estimation process.

How the Critical Audit Matter was addressed in our Audit

The primary procedures we performed to address
this critical audit matter involved the assistance of our valuation specialist and included the following: (i) we reviewed the qualifications
of the valuation specialist utilized by