Glucotrack, Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Holders As of April 13, 2021, there were approximately ______ holders of record of our Common Stock. Dividends We have never declared or paid any cash dividends on our Common Stock and do not anticipate paying any dividends on our Common Stock in the foreseeable future. Any cash that might be available for payment of dividends will be used to expand our business. Item 6. Selected Financial Data Not required for smaller reporting companies. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . Overview We are a medical device company focused on the design, development and commercialization of non-invasive glucose monitoring devices for use by people with diabetes. Integrity Israel was founded in 2001 with a mission to develop, produce and market non-invasive glucose monitors for home use by diabetics. We have developed a non-invasive blood glucose monitor, GlucoTrack®, which is designed to help people with diabetes obtain blood glucose level readings without the pain, inconvenience, cost and difficulty of conventional (invasive) spot finger stick devices. Our first generation product, GlucoTrack® 1.0 utilizes a patented combination of ultrasound, electromagnetic and thermal technologies to obtain blood glucose measurements in less than one minute via a small sensor that is clipped onto one’s earlobe and connected to a small, handheld control and display unit, all without drawing blood. Our next generation product, GlucoTrack® 2.0 which is currently under development, utilizes substantially identical underlying sensor technology, and is expected to be a completely wireless sensor to be clipped on the earlobe. GlucoTrack eliminates the handheld unit and will transmit results directly to a user’s smartphone. 40 We may be at risk as a result of the current COVID-19 pandemic. Risks that could affect our business include the duration and scope of the COVID-19 pandemic and the impact on the demand for our products; actions by governments, businesses and individuals taken in response to the pandemic; the length of time of the COVID-19 pandemic and the possibility of its reoccurrence; the timing required to develop effective treatments and a vaccine in the event of future outbreaks; the eventual impact of the pandemic and actions taken in response to the pandemic on global and regional economies; and the pace of recovery when the COVID-19 pandemic subsides. Critical Accounting Policies This Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. 41 Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included elsewhere in this report. Recently issued accounting pronouncements not yet adopted Accounting Standards Update 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” In June 2016, The FASB has issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today are still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. ASU 2016-13 requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. On November 2019, the FASB issued ASC Update Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) – Effective dates, which, among other provisions the effective date of ASU 2016-13 was amended as follows 1. Public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (SRCs) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. 2. All other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As the company is eligible to considered as smaller reporting company ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The adoption of this standard is not expected to result in a material impact to the Company’s financial statements 42 Results of Operations The following discussion of our operating results explains material changes in our results of operations for the years ended December 31, 2020 and December 31, 2019. The discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report. Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 Revenues During the year ended December 31, 2020 and 2019, our revenues were immaterial. Research and development expenses Research and development expenses were $1,532 thousand for the year ended December 31, 2020, as compared to $1,606 thousand for the prior-year period. The decrease is immaterial. Research and development expenses consist primarily of salaries and other personnel-related expenses, including stock-based compensation expenses, materials, travel expenses, clinical trials and other expenses. We expect research and development expenses to increase in 2021 and beyond, primarily due to hiring additional personnel and developing our product line, as well the development of GlucoTrack® 2.0; however, we may adjust or allocate the level of our research and development expenses based on available financial resources and based on our commercial needs, including the FDA registration process, specific requirements from customers, development of new GlucoTrack® models and others. Selling and marketing expenses Selling and marketing expenses were $415 thousand for the year ended December 31, 2020, as compared to $573 thousand for the prior-year period. The decrease is primarily attributable to the Company’s decision to reduce its business development expenses in the European market until such a time when the proof of concept of obtaining reimbursement for the product in test markets is realized and general review and streamlining of expenses. Selling and marketing expenses consist primarily of professional services, salaries, travel expenses and other related expenses. We expect selling and marketing expenses to increase in 2021 and beyond as we continue our focus on marketing and sales. General and administrative expenses General and administrative expenses were $1,185 thousand for the year ended December 31, 2020, as compared to $1,535 thousand for the prior-year period. The decrease is attributable to eliminating several positions in the Company’s headquarters in Israel. General and administrative expenses consist primarily of professional services, salaries, travel expenses and other related expenses for executive, finance and administrative personnel, including stock-based compensation expenses. Other general and administrative costs and expenses include facility-related costs not otherwise included in research and development costs and expenses, and professional fees for legal and accounting services. Financing (Income) expenses, net Financing Income, net was $98 thousand for the year ended December 31, 2020, as compared to financing expense, net, of $10 thousand for the prior-year period. The increased is attributable to Interest Income on deposit in the amount of $140 thousand, which did not recur in 2019. 43 Net Loss Net loss was $3,132 thousand for the year ended December 31, 2020, as compared to a net loss of $3,506 thousand for the prior-year period. The decrease in net loss is attributable primarily to the decrease in our general and administrative expenses, financing expenses, selling and marketing expenses and research and development expenses as described above. Liquidity and Capital Resources As of December 31, 2020, and December 31, 2019, cash on hand was $9,823 thousand and $419 thousand, respectively. During 2020, we received $13,009 thousand from the issuance and sale of our common stocks, We do not anticipate that our income from operations will be sufficient to sustain our operations in the next 12 months. Based on our current cash burn rate, strategy and operating plan, we believe that our cash and cash equivalents will enable us to operate for a period of significantly more than one year from the date of this report During the years 2003-2004, Integrity Israel received loans from stockholders (four separate lenders) in a total amount of approximately $400 thousand. However, following the repayment of the entire balance to lender in 2015, the remaining balance as of December 31,2020 is approximately $197 thousand. We are required to pay royalties to the Office of the Chief Scientist at a rate ranging between 3-5% of the proceeds from the sale of the Company’s products arising from the development plan up to an amount equal to $93 thousand, plus interest at LIBOR from the date of grant. As of December 31, 2020, the contingent liability with respect to royalty payment on future sales equals to approximately $43 thousand, excluding interest. Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 Net Cash Used in Operating Activities for the Years Ended December 31, 2020 and December 31, 2019 Net cash used in operating activities was $3,501 thousand and $3,899 thousand for the years ended December 31, 2020 and 2019, respectively. Net cash used in operating activities primarily reflects the net loss for those periods of $2,696 thousand and $3,516 thousand, respectively. Net Cash Used in Investing Activities for the Years Ended December 31, 2020 and December 31, 2019 Net cash used in investing activities was $53 thousand and $23 thousand for the years ended December 31, 2020 and 2019, respectively, consisting of equipment purchases (such as computers, research and development and office equipment). 44 Net Cash Provided by Financing Activities for the Years Ended December 31, 2020 and December 31, 2019 Net cash provided by financing activities was $13,009 thousand and $4,198 thousand for the years ended December 31, 2020 and 2019, respectively. Cash provided by financing activities for the years ended December 31, 2019 reflected net capital raised from the issuance of Series D Units. Cash provided by financing activities for the years ended December 31, 2020 reflected net capital raised in February 2020 throughout issuance of 37.5 million common stocks. Off-Balance Sheet Arrangements As of December 31, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not required for smaller reporting companies. Item 8. Financial Statements and Supplementary Data. The financial statements required by this Item 8 are filed herewith commencing on page F-1 hereto and are incorporated herein by reference. Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure. None.