What changed in this filing

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Item 1. Financial Statements

2021-05-21 compared with 2020-11-12 · 287 added, 459 removed, 152 unchanged (83% of the section changed)

Financial Statements

US dollars (except share data)

September 30,

APPLICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

In thousands of US dollars

(except share data)

March 31, 2021

December 31, 2020

Current Assets

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Other current assets

Total current assets

current assets

Operating lease right-of-use assets, net

2 unchanged sentences

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Current Liabilities

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Stockholders’

Equity (Deficit)

Common Stock of $ 0.001 par value (“Common Stock”):

500,000,000 shares authorized;

200,669,064 and 161,858,436 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

200,781,064 shares issued and outstanding as of March 31, 2021

and December 31, 2020

Additional paid-in capital

Receipts on account of shares

Accumulated other comprehensive income

Accumulated deficit

(92,519,886 )

(90,702,929 )

Total Stockholders’

equity (deficit)

TOTAL LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

accompanying notes are an integral part of these condensed consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

US dollars (except share data)

Nine-month period ended September 30,

Three-month period ended September 30,

Research and development

Selling and marketing expenses

General and administrative

In thousands of US dollars

Three-month period ended March 31,

Research and development expenses

Selling and Marketing

General and administrative expenses

Total operating expenses

Operating loss

Finance Income (expense), net:

Other comprehensive expenses:

Financing income (expense), net

Loss for the period

Other comprehensive income:

Foreign currency translation adjustment

Comprehensive Loss for the period

Net Loss per Common Share

Average number of common shares used in computing basic and diluted loss per share

accompanying notes are an integral part of the condensed consolidated financial statements.

Loss per share (Basic and Diluted)

Common shares used in computing Basic and Diluted Loss per share

APPLICATIONS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

US Dollars ( except share data)

dollars (except share data)

Accumulated other

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comprehensive

Equity (Deficit)

Balance at January 1, 2019

(87,186,783 )

Loss for the period

Other comprehensive loss

Amounts allocated to Series D-1, D-2 and Series D-3 Warrants, net

Amount allocated to issuance of Common Stock from Series D offering

Issuance of shares as settlement of financial liabilities

Warrants issued as consideration for placement agent services

Stock-based compensation

Balance at September 30, 2019

(90,104,070 )

Balance at July 1, 2019

(89,107,293 )

Loss for the period

Other comprehensive loss

Stock-based compensation

Balance at September 30, 2019

(90,104,070 )

Balance at January 1, 2020

(90,702,929 )

Loss for the period

Other comprehensive loss

Issuance of Common Stock, net

Balance as of January 1, 2020

Loss for the period of three months

Other comprehensive income

Issuance of Common Stock net of cash issuance costs

Issuance of shares as settlement of financial liabilities

Warrants issued as consideration for placement agent services

Warrants issued as consideration for placement services

Stock-based compensation

Balance at September 30, 2020

(92,519,886 )

Balance at July 1, 2020

(92,010,871 )

Loss for the period

Other comprehensive loss

Issuance of shares as settlement of financial liabilities

Balance as of March 31, 2020

dollars (except share data)

comprehensive

Stockholders’

Balance as of January 1, 2021

Loss for the period of three months

Other comprehensive income

Stock-based compensation

Balance at September 30, 2020

(92,519,886 )

accompanying notes are an integral part of these condensed consolidated financial statements

Balance as of March 31, 2021

APPLICATIONS, INC.

CONSOLIDATED STATEMENTS OF CHANGE IN CASH FLOWS

Nine-month period ended

September 30.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three-month period ended March 31,

Cash flows from operating activities:

Loss for the period

$ (1,816,957 )

$ (2,917,287 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile loss for the period to net cash used in operating activities:

Stock-based compensation

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Increase in accounts receivable

Decrease (increase) in inventory

Increase in other current assets

Increase in inventory

Decrease (increase) in other current assets

Decrease in accounts payable

Gain from settlement of liability to service provider

Decrease in other current liabilities

Increase (Decrease) in other current liabilities

Net cash used in operating activities

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Cash flows from financing activities

Proceeds from issuance of common stock, net of cash issuance expenses

Proceeds allocated to Series D Warrants, net of cash issuance expenses

Issuance of Common Stock net of cash issuance expenses

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents, and restricted cash

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Change in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of the period

Cash, cash equivalents, and restricted cash, end of period

Cash, cash equivalents, and restricted cash at end of the period

accompanying notes are an integral part of these condensed consolidated financial statements.

Supplementary

information on financing activities not involving cash flows (unaudited):

the period of nine months ending September 30, 2020 and 2019, the Company settled liability to the board members and management

in the amount of approximately $168 and $307 thousand, respectively via issuance of common stocks.

the period of nine months ending September 30, 2020, $756,087 representing the fair value of warrants issued as consideration

for placement agent services.

the three months ending March 31, 2020, the Company settled the board members fees for the first quarter of 2020 in the amount

of $63 thousand through the issuance of 158,237 shares of common stock (issuance of the abomination stocks was done on the second quarter of 2020).

the three months ending March 31, 2020, $756 thousand representing the fair value of warrants issued as consideration for placement

agent services.

This amount was accounted for as Warrants with down-round protection.

Upon issuance, the fair value

was recognized as an increase in additional paid in capital.

accompanying notes are an integral part of the condensed consolidated financial statements.

Upon issuance, the fair value was recognized

as an increase in additional paid in capital.

APPLICATIONS, INC.

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(the “Company”) was incorporated on May 18, 2010 under the laws of the State of Delaware.

July 15, 2010, Integrity Acquisition Corp.

15, 2010, Integrity Acquisition Corp.

(hereinafter:

“Integrity Acquisition”), a wholly owned Israeli

subsidiary of the Company, which was established on May 23, 2010, completed a merger with A.D.

“Integrity Acquisition”), a wholly owned Israeli subsidiary

of the Company, which was established on May 23, 2010, completed a merger with A.D.

Integrity Applications Ltd.

(hereinafter:

“Integrity Israel”), an Israeli corporation that was previously held by the stockholders of the

Pursuant to the merger, all equity holders of Integrity Israel received the same proportional ownership in the Company

as they had in Integrity Israel prior to the merger.

Following the merger, Integrity Israel became a wholly-owned subsidiary

of the Company.

As the merger transaction constituted a structural reorganization, the merger has been accounted for at historical

cost in a manner similar to a pooling of interests.

Integrity Israel was incorporated in 2001 and commenced its operations

Integrity Israel, a medical device company, focuses on the design, development and commercialization of non-invasive

glucose monitoring devices for use by people with diabetes and prediabetes.

its incorporation, the Company’s material operations have all been carried out by Integrity Israel.

The development

and commercialization of Integrity Israel’s product is expected to require substantial expenditures.

has not yet generated significant revenues from operations, and therefore they are dependent upon external sources for

financing their operations.

As of September 30, 2020, the Company has an accumulated deficit of $92,519,886.

in each year since its inception, the Company reported losses from operations and negative cash flows from operating activities

described in Note 3, on February 14, 2020, the Company closed on a $15 million private placement of its common stock,

for which it received net cash in excess of $13,009,269.

As of September 30, 2020, the company has cash, cash equivalents

and restricted cash in the amount of $10,764,299, which is expected to be sufficient to meet its capital needs for at

least 12 months from the date of issuance of these financial statements, thus the Company is expected to be able to operate

as a going concern for at least 12 months from the date hereof.

“Integrity

Israel”), an Israeli corporation that was previously held by the stockholders of the Company.

Pursuant to the merger, all equity

holders of Integrity Israel received the same proportional ownership in the Company as they had in Integrity Israel prior to the

Following the merger, Integrity Israel became a wholly-owned subsidiary of the Company.

As the merger transaction constituted

a structural reorganization, the merger has been accounted for at historical cost in a manner similar to a pooling of interests.

Integrity Israel was incorporated in 2001 and commenced its operations in 2002.

Integrity Israel, a medical device company, focuses

on the design, development and commercialization of non-invasive glucose monitoring devices for use by people with diabetes and prediabetes.

its incorporation, the Company’s material operations have all been carried out by Integrity

The development and commercialization of Integrity Israel’s product is expected

to require substantial expenditures.

The Group has not yet generated significant revenues

from operations, and therefore they are dependent upon external sources for financing their

As of March 31, 2021, the Company has an accumulated deficit of $94,303 thousand.

In addition, in each year since its inception, the Company reported losses from operations

and negative cash flows from operating activities

February 14, 2020, the Company closed on a $15 million private placement of its common stock, for which it received net cash

in excess of $13,009 thousand.

As of March 31,2021, the company had cash and cash equivalents in the amount of approximately

$8,887 thousand, which is expected to be sufficient to meet its capital needs for at least 12 months from the date of issuance

of these interim financial statements, thus the Company is expected to be able to operate as a going concern for at

least 12 months from the date hereof.

APPLICATIONS, INC.

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of presentation

accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the

Company’s consolidated financial statements and related notes contained in the Company’s Annual Report on Form

10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on

April 14, 2020.

The unaudited condensed consolidated financial statements have been prepared in accordance with the rules

and regulations of the SEC related to interim financial statements.

As permitted under those rules, certain information and

footnote disclosures normally required or included in financial statements prepared in accordance with U.S.

GAAP have been

condensed or omitted.

accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with our consolidated

financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed

with the Securities and Exchange Commission (“SEC”) on April 13, 2021.

The unaudited condensed consolidated financial

statements have been prepared in accordance with the rules and regulations of the SEC related to interim financial statements.

permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared

in accordance with U.S.

GAAP have been condensed or omitted.

The financial information contained herein is unaudited;

however, management believes all adjustments

have been made that are considered necessary to present fairly the results of the Company’s financial position and operating

results for the interim periods.

however, management

believes all adjustments have been made that are considered necessary to present fairly the results of the Company’s financial

position and operating results for the interim periods.

All such adjustments are of a normal recurring nature

results for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the

year ending December 31, 2020 or for any other interim period or for any future period.

results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending

December 31, 2021 or for any other interim period or for any future period.

of Consolidation

consolidated financial statements include the accounts of the Company and its subsidiary.

Significant intercompany balances

and transactions have been eliminated in consolidation.

Significant intercompany balances and transactions

have been eliminated in consolidation.

Loss Per Share

Company computes net loss per share in accordance with ASC 260, “Earnings per share”.

Basic loss per share is

computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock

outstanding during the period, net of the weighted average number of treasury shares (if any).

loss per common share is computed similar to basic loss per share, except that the denominator is increased to include the

number of additional potential shares of common stock that would have been outstanding if the potential shares of common stock

had been issued and if the additional shares of common stock were dilutive.

Potential shares of common stock are excluded

from the computation for a period in which a net loss is reported or if their effect is anti-dilutive.

amount of 81,346,964 and 78,900,534 weighted average outstanding stock options and stock warrants have been excluded from

the calculation of the diluted net loss per share for the period of nine months ended September 30, 2020 and 2019, respectively,

because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was determined

to be anti-dilutive.

amount of 83,518,512 and 81,527,505 weighted average outstanding stock options and stock warrants have been excluded

from the calculation of the diluted net loss per share for the period of three Months ended September 30, 2020 and 2019, respectively,

because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was determined

to be anti-dilutive.

Basic loss per share is computed

by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during

the period, net of the weighted average number of treasury shares (if any).

loss per common share is computed similar to basic loss per share, except that the denominator is increased to include the number

of additional potential shares of common stock that would have been outstanding if the potential shares of common stock had been

issued and if the additional shares of common stock were dilutive.

Potential shares of common stock are excluded from the computation

for a period in which a net loss is reported or if their effect is anti-dilutive.

amount of 84,260,774 and 82,442,314 outstanding stock options and stock warrants have been excluded from the calculation

of the diluted net loss per share for the period of three months ended March 31, 2021 and 2020, respectively, because the effect

of the common shares issuable as a result of the exercise or conversion of these instruments was determined to be anti-dilutive.

APPLICATIONS, INC.

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of estimates in the preparation of financial statements

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United

States (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of

assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial

statements, and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from

those estimates.

As applicable to these consolidated financial statements, the most significant estimates and assumptions

relate to determination of net realizable value of inventory.

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts

of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

As applicable to these consolidated

financial statements, the most significant estimates and assumptions relate to the determination of net realizable value of inventory.

prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications did

not have material effect on the reported results of operations, shareholder’s equity or cash flows .

RECENT EVENTS

January 21, 2020, the Company announced that it has received CE Mark approval for a major enhancement to GlucoTrack, allowing

for a user to perform the calibration process by themselves, without the need for a certified calibrator.

The initial CE Mark

approval received for GlucoTrack required a calibration process that took three hours to complete, required eight invasive

finger stick reference measurements, needed to be repeated every thirty days and required a certified calibrator to perform

the calibration.

After a series of successful enhancements and approvals, the calibration process now takes just thirty minutes,

requires just three invasive reference measurements, and needs to be repeated only once every nine months.

With self-calibration,

a user can now perform this simplified process in the privacy and convenience of their own home.

February 14, 2020, the Company entered into a Securities Purchase Agreement and Registration Rights Agreement (collectively,

the “Agreements”) with an accredited investor, pursuant to which the accredited investor purchased 37,500,000

shares of the Company’s common stock, par value $0.001 per share, for an aggregate gross purchase price of $15,000,000.

The Company received net proceeds of $13,009,269 after payment of fees to its placement agent and legal and accounting fees.

connection with the agreement, the Company’s placement agent was paid $1,950,000 in fees in connection therewith, and

issued five years warrant to purchase 3,750,000 shares at an exercise price per share of $0.40 with terms similar to the terms

of the Placement Agent Warrants issued in 2019.

The fair value of the warrants as of the agreement date was $756,087.

Company may be at risk as a result of the current COVID-19 pandemic.

Risks that could affect its business include the duration

and scope of the COVID-19 pandemic and the impact on the demand for its 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;

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.

These reclassifications did not have

material effect on the reported results of operations, shareholder’s equity or cash flows .

APPLICATIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (cont.)

Company has entered into several non-cancellable operating lease agreements for the Company’s offices and three vehicles.

company has entered into several non-cancelable operating lease agreements for the company’s offices and few vehicles.

The company’s leases have original lease periods expiring between 2021 and 2023.

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include primarily fix payments.

the Company does not assume renewals in its determination of the lease term unless the renewals

The company does not assume renewals in the determination of the lease term unless the renewals

are deemed to be reasonably assured at lease commencement.

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components of lease costs, lease term and discount rate are as follows:

Nine Months Ended

September 30, 2020

Three Months Ended

March 31, 2021

Operating lease cost:

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Weighted Average Discount Rate

APPLICATIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (cont.)

LEASES (cont.)

following is a schedule, by years, of maturities of operating lease liabilities as of September 30, 2020:

September 30, 2020

following is a schedule, by years, of maturities of operating lease liabilities as of March 31, 2021:

March 31, 2021

The remainder of 2021

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Present value of lease liabilities

FINANCING INCOME (EXPENSES), NET

Nine-month period ended September 30,

Three-month period ended September 30,

Israeli CPI linkage difference on principal of loans from stockholders

Exchange rate differences

Interest income on credit in bank

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Quarterly Report on Form 10-Q contains forward-looking statements.

These forward-looking statements include statements about our

expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations,

strategies and prospects.

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q,

including statements regarding our future activities, events or developments, including such things as future revenues, capital

raising and financing, product development, clinical trials, regulatory approval, market acceptance, responses from competitors,

capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive

strengths, goals, expansion and growth of our business and operations, plans, references to future success, projected performance

and trends, and other such matters, are forward-looking statements.

These forward-looking statements include statements about our expectations,

beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including statements

regarding our future activities, events or developments, including such things as future revenues, capital raising and financing, product

development, clinical trials, regulatory approval, market acceptance, responses from competitors, capital expenditures (including the

amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth

of our business and operations, plans, references to future success, projected performance and trends, and other such matters, are forward-looking

The words “believe,”

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“should”

and other similar words and phrases, are intended to identify forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q are based on certain historical trends, current conditions

and expected future developments as well as other factors we believe are appropriate in the circumstances.

These statements relate

only to events as of the date on which the statements are made and we undertake no obligation to update publicly any forward-looking

statements, whether as a result of new information, future events or otherwise, except as required by law.

All of the forward-looking

statements made in this Quarterly Report on Form 10-Q are qualified by these cautionary statements and there can be no assurance

that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected

consequences to or effects on us or our business or operations.

Whether actual results will conform to our expectations and predictions

is subject to a number of risks and uncertainties that may cause actual results to differ materially.

Risks and uncertainties,

the occurrence of which could adversely affect our business, include the risks identified under the caption “Risk Factors”

and other similar

words and phrases, are intended to identify forward-looking statements.

The forward-looking statements made in this Quarterly Report

on Form 10-Q are based on certain historical trends, current conditions and expected future developments as well as other factors we

believe are appropriate in the circumstances.

These statements relate only to events as of the date on which the statements are made

and we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events

or otherwise, except as required by law.

All of the forward-looking statements made in this Quarterly Report on Form 10-Q are qualified

by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially

realized, that they will have the expected consequences to or effects on us or our business or operations.

Whether actual results will

conform to our expectations and predictions is subject to a number of risks and uncertainties that may cause actual results to differ

Risks and uncertainties, the occurrence of which could adversely affect our business, include the risks identified under

the caption “Risk Factors”

included in our annual report on Form 10-K for the year ended December 31, 2020.

The following discussion should be read in conjunction

with the condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form

are a medical device company, founded in 2001, focused on the design, development and commercialization of non-invasive glucose

monitoring devices for use by people with diabetes and prediabetes.

We have developed a non-invasive blood glucose monitor, the

GlucoTrack®

model DF-F glucose monitoring device, 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.

The following

discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item

1 of this Quarterly Report on Form 10-Q.

We are a medical device

company, founded in 2001, focused on the design, development and commercialization of non-invasive glucose monitoring devices for

use by people with diabetes and prediabetes.

We have developed a non-invasive blood glucose monitor, the GlucoTrack®

glucose monitoring device, 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.

The GlucoTrack®

model DF-F 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.

are currently nearing the completion of our own companion mobile application for both Android and iOS and a cloud-based solution,

to offer a digital platform to provide real time, data driven personalized tools to effectively help a user manage their diabetes.

model DF-F 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.

are currently developing our own companion applications and a cloud-based solution, as well as conducting ongoing discussions with potential

partners, to offer an effective platform to provide real time, data driven personalized tools to effectively help a user manage their

In addition to being a critical and effective management tool for the end user, we believe that third parties such as insurers,

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and that this is an opportunity for us to develop an additional revenue source.

We are also nearing the completion of the GT-Link®,

a technology that enables the current version of GlucoTrack®

to be Bluetooth and wi-fi enabled.

June 2013, we received the initial Conformité

Européene (CE) Mark (indicating the conformity of the Company’s

product with health, safety, and environmental protection standards for products sold within the European Economic Area) approval

for the GlucoTrack®

model DF-F non-invasive glucose monitoring device from DEKRA Certification B.V., our European notified

body (the “Notified Body”), which is an entity that has been accredited by a member state of the European Union (“EU”)

to assess whether a product to be placed on the market meets certain preordained standards.

original approval required that the device be re-calibrated every 30 days, with each such re- calibration taking between 2.5 and

3 hours to complete.

In 2014, we received CE Mark approval for nine months’

Européene (CE) Mark (indicating the conformity of the Company’s product

with health, safety, and environmental protection standards for products sold within the European Economic Area) approval for the GlucoTrack®

model DF-F non-invasive glucose monitoring device from DEKRA Certification B.V., our European notified body (the “Notified Body”),

which is an entity that has been accredited by a member state of the European Union (“EU”) to assess whether a product to

be placed on the market meets certain preordained standards.

original approval required that the device be re-calibrated every 30 days, with each such re- calibration taking between 2.5 and 3 hours

In 2014, we received CE Mark approval for six months’

calibration validity of the same device.

approval eliminated the need for monthly re-calibrations and enabled the calibration process to be conducted only when the sensor

is replaced, once every 6 months.

This approval eliminated

the need for monthly re-calibrations and enabled the calibration process to be conducted only when the sensor is replaced, once every

In 2015, we received a further approval from the Notified Body for improvements to the GlucoTrack®

model DF-F to simplify and shorten the initial calibration process for the device (from approximately 2.5 hours to approximately

half an hour).

All these improvements enhance the competitiveness of the device and its commercial viability.

In addition, we

received approval from the Notified Body on the updated intended use for the device, which expands the intended user population

to include not only Type 2 diabetics, but also people suffering from pre-diabetes conditions, which we believe represents a material

expansion of the potential market for the device.

Also in 2015, we received approval from the Notified Body for further improvements

to the GlucoTrack®

model DF-F that increase the accuracy and efficacy of the device.

January 21, 2020, the Company announced that it has received CE Mark approval for a major enhancement to GlucoTrack, allowing

for a user to perform the calibration process by themselves, without the need for a certified calibrator.

The initial CE Mark

approval received for GlucoTrack required a calibration process that took three hours to complete, required eight invasive finger

stick reference measurements, needed to be repeated every thirty days and required a certified calibrator to perform the calibration.

After a series of successful enhancements and approvals, the calibration process now takes just thirty minutes, requires just

three invasive reference measurements, and needs to be repeated only once every six months.

With self-calibration, a user can

now perform this simplified process in the privacy and convenience of their own home.

As a result of these incremental, but important,

enhancements to the performance of the device, we believe that the product is ready for commercial launch in specific market segments.

continue to invest resources on our intellectual property to protect our existing patents and trademarks, and anticipate additional

patents for our existing technology, as well as future products in development.

In addition, we are exploring improvements and

changes to our algorithms and sensor technologies with a goal of increasing our Mean Absolute Relative Difference (MARD) and overall

model DF-F to simplify

and shorten the initial calibration process for the device (from approximately 2.5 hours to approximately half an hour).

All these improvements

enhance the competitiveness of the device and its commercial viability.

In addition, we received approval from the Notified Body on the

updated intended use for the device, which expands the intended user population to include not only Type 2 diabetics, but also people

suffering from pre-diabetes conditions, which we believe represents a material expansion of the potential market for the device.

in 2015, we received approval from the Notified Body for further improvements to the GlucoTrack®

model DF-F that increase the accuracy

and efficacy of the device.

January 21, 2020, the Company announced that it has received CE Mark approval for a major enhancement to GlucoTrack, allowing for a user

to perform the calibration process by themselves, without the need for a certified calibrator.

The initial CE Mark approval received

for GlucoTrack required a calibration process that took three hours to complete, required eight invasive finger stick reference measurements,

needed to be repeated every thirty days and required a certified calibrator to perform the calibration.

After a series of successful

enhancements and approvals, the calibration process now takes just thirty minutes, requires just three invasive reference measurements,

and needs to be repeated only once every six months.

With self-calibration, a user can now perform this simplified process in the privacy

and convenience of their own home.

As a result of these incremental, but important, enhancements to the performance of the device, we

believe that the product is ready for commercial launch in specific market segments.

and quality are non-negotiables in the medical devices industry.

Regulatory requirements are increasingly stringent throughout

every step of a product’s life cycle, including service and delivery.

More and more, organizations in the industry are expected

to demonstrate their quality management processes and ensure best practice in everything they do.

Regulatory requirements are increasingly stringent throughout every

step of a product’s life cycle, including service and delivery.

More and more, organizations in the industry are expected to

demonstrate their quality management processes and ensure best practice in everything they do.

ISO 13485, is an internationally

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The ISO 13485:2003

certification signifies that we have met the standards required for company-wide implementation of device quality management system(s).

The scope of the certification is design, development, manufacture and service of non-invasive glucose monitoring systems for

certification signifies that we have met the standards required for company-wide implementation of device quality management

The scope of the certification is design, development, manufacture and service of non-invasive glucose monitoring systems

for home use.

Annex II also addresses quality control systems.

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device that do not affect the intended use and/or safety performance.

The ISO 13485:2003 and Annex II certifications enable us

to potentially reduce the time to market for product sales on new, enhanced or modified GlucoTrack®

model DF-F devices.

have identified, what we believe, are the critical success factors necessary for the successful commercialization of Glucotrack®.

These factors include:

1) selecting the right distribution partner within countries that have knowledge and experience in diabetes,

the appropriate capabilities and proven performance in the sales, marketing, and customer service in support of medical devices,

and a commitment to investing the appropriate resources required for a successful launch and building of the business;

2) segmenting

and targeting the right customers including key opinion leaders, treating physicians, and diabetes nurses within the healthcare

provider communities as well as those patient groups that will benefit most from the use of a non-invasive device;

a cost structure and end user price point for GlucoTrack®

The ISO 13485:2003 and Annex II certifications enable us to

potentially reduce the time to market for product sales on new, enhanced or modified GlucoTrack®

the second half of 2017 we conducted a strategic review of our previous commercial activities.

We established a cross-functional task

force with the goal of reviewing the current commercial performance in all countries and identifying the critical success factors (CSF’s)

necessary for successful commercialization.

The CSF’s that were determined to be most important to our future commercial success

1) selecting the right distribution partner within countries that have knowledge and experience in diabetes, the appropriate

capabilities and proven performance in the sales, marketing, and customer service in support of medical devices, and a commitment to

investing the appropriate resources required for a successful launch and building of the business;

2) segmenting and targeting the right

customers including key opinion leaders, treating physicians, and diabetes nurses within the healthcare provider communities as well

as those patient groups that will benefit most from the use of a non-invasive device;

3) revising the cost structure for GlucoTrack®

so that it will be more affordable on a monthly basis for patients;

and 4) working with government authorities and health insurance companies to achieve full or partial reimbursement for GlucoTrack®

and 4) working with government authorities and health insurance companies

to achieve full or partial reimbursement for GlucoTrack®

within covered medical plans.

have started the implementation of this commercial approach with the Netherlands, and signed an exclusive distribution agreement

with MediReva B.V.

We have been working closely with our new distributor on product and disease area training across the organization,

and segmentation of the local target audiences including key opinion leaders, treating physicians, and diabetes nurses.

aspect of our launch preparations are the discussions being held with many health insurance companies.

Approval of full or partial

reimbursement by the health insurance companies will be a key factor in enabling us to achieve significant sales volume.

currently working with several of these insurance companies on steps towards reimbursement approval.

In addition to the Netherlands,

we are in the process of identifying and negotiating with additional distributors in other key geographic regions.

our successful capital raise in the first quarter of this year of $15,000,000, we have been planning for an up-listing of our

Common Stock to a national exchange.

While we believe we have been taking the appropriate steps to up-list, we cannot provide

assurances at this time as to whether and when we will be successful with respect to this plan.

year, as we have begun the commercialization stage of the Company, we continue to add to our talent base in important management

positions and advisors, each with expertise in their respective fields, such as artificial intelligence, data analytics, digital

health and wearables.

have started the implementation of this new commercial program by selecting the Netherlands, where we will pilot this approach as our

proof-of-concept.

This country was chosen based on the relatively smaller size of the marketplace that will allow us to be able to rapidly

assess our performance and make adjustments as necessary.

On December 22, 2017 we signed an exclusive distribution agreement with a new

partner in the Netherlands (MediReva B.V.) and are underway.

We have been working closely with our new distributor and have accomplished:

product and disease area training across the organization;

segmentation of the local target audiences including key opinion leaders,

treating physicians, and diabetes nurses.

The most important aspect of our launch preparations are the discussions being held with many

health insurance companies.

Approval of full or partial reimbursement by the health insurance companies will be a key factor in enabling

us to achieve significant sales volume.

We are currently working with several of these companies on initial pilot programs with GlucoTrack®

as an important step towards reimbursement approval.

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;

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;

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.

Accounting Policies

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.

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

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.

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.

As applicable to the consolidated

financial statements included elsewhere in this report, the most significant estimates and assumptions relate to determination

of net realizable value of inventory.

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.

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.

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.

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.

As applicable to the consolidated financial statements included elsewhere in this report, the

most significant estimates and assumptions relate to determination of net realizable value of inventory.

of Operations

following discussion of our operating results explains material changes in our results of operations for the nine-month period

ended September 30, 2020 compared with the same period ended September 30, 2019.

The discussion should be read in conjunction

with the financial statements and related notes included elsewhere in this report.

Months ended September 30, 2020 compared to Nine Months ended September 30, 2019

the nine-month period ended September 30, 2020, we had revenues of $2,271 from orders for our GlucoTrack®

model DF-F glucose

monitoring device and PEC that are replaced every six months, as compared with $140,255 for the prior-year period due to a decrease

in orders for our products.

recognize revenues from sales of the GlucoTrack®

model DF-F and PECs when control is transferred to the customer and collectability

and development expenses

and development expenses were $1,270,295 for the nine-month period ended September 30, 2020, as compared to $1,203,616 for the

prior-year period.

The increase is immaterial.

and development expenses consist primarily of salaries and other personnel-related expenses, including stock-based compensation

expenses, materials, (including provision for slow inventory), travel expenses, clinical trials and other expenses.

research and development expenses to increase in 2020 and beyond, primarily due to hiring additional personnel and developing

our product line, as well as improvement of the GlucoTrack®

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.

and marketing expenses

and marketing expenses were $274,183 for the nine-month period ended September 30, 2020, as compared to $444,555 for the prior-year

The decrease is primarily attributable to the Company’s decision to reduce

its business development personnel 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 marketing expenses consist primarily of professional services, salaries, travel expenses and other related expenses.

selling and marketing expenses to increase in 2020 and beyond as we continue our focus on marketing and sales of the GlucoTrack®

model DF-F and potential FDA clinical trials.

and administrative expenses

and administrative expenses were $711,795 for the nine-month period ended September 30, 2020, as compared to $1,391,916 for the

prior-year period.

The decrease is primarily attributable to the departure of our former President and CFO, a reduction in professional

fees and the reduction of stock based compensation during the last half of 2019.

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.

income, net was $98,978 for the nine-month period ended September 30, 2020, as compared to financing expenses of $17,455 for the

prior-year period.

For more information see Note 5 to the financial statements.

loss was $1,816,957 for the nine-month period ended September 30, 2020, as compared to $2,917,287 for the prior-year period.

decrease in net loss is attributable primarily to the decrease in our operating expenses, as described above.

Months ended September 30, 2020 compared to Three Months ended September 30, 2019

the three-month period ended September 30, 2020, we had zero revenues from orders for our GlucoTrack®

model DF-F glucose monitoring

device and PEC that are replaced every six months, as compared with $4,175 for the prior-year period due to a decrease in orders

for our products.

recognize revenues from sales of the GlucoTrack®

model DF-F and PECs when control is transferred to the customer and collectability

following discussion of our operating results explains material changes in our results of operations for the three-month period ended

March 31, 2021 compared with the same period ended March 31, 2020.

The discussion should be read in conjunction with the financial statements

and related notes included elsewhere in this report.

Months ended March 31, 2021 compared to Three Months ended March 31, 2020

the three-month period ended March 31, 2021, we had no revenues.

and development expenses

and development expenses were $476,364 for the three-month period ended September 30, 2020, as compared to $377,377 for the prior-year

The increase is attributable to an increase in salary and other personnel-related expenses during 2020.

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 2020 and beyond, primarily due to hiring additional personnel and developing our product line, as well as improvement of the

GlucoTrack®

however, we may adjust or allocate the level of our research and development expenses based on available

and development expenses were $309 thousand for the three-month period ended March 31, 2021, as compared to $413 thousand for the prior-year

The decrease is immaterial.

and development expenses consist primarily of salaries and other personnel-related expenses, materials, 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 next generation product line, 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,

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and marketing expenses

and marketing expenses were $93,366 for the three-month period ended September 30, 2020, as compared to $168,259 for the prior-year

The decrease is primarily attributable to the Company’s decision to reduce

its business development personnel 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 marketing expenses were $23 thousand for the three-month period ended March 31, 2021, as compared to $91 thousand for the prior-year

The decrease is immaterial .

and marketing expenses consist primarily of professional services, salaries, travel expenses and other related expenses.

selling and marketing expenses to increase in 2020 and beyond as we continue our focus on marketing and sales of the GlucoTrack®

model DF-F and potential FDA clinical trials.

and administrative expenses

and administrative expenses were $317,597 for the three-month period ended September 30, 2020, as compared to $439,012 for the

and administrative expenses were $564 thousand for the three-month period ended March 31, 2021, as compared to $252 thousand for the

prior-year period.

The decrease is primarily attributable to the departure of our former President and CFO, a reduction in professional

fees and the reduction of stock based compensation during the last half of 2019.

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.

income (expenses), net

income, net was $40,245 for the three-month period ended September 30, 2020, as compared to financing expenses of $16,304 for

the prior-year period.

For more information see Note 5 to the financial statements.

loss was $509,015 for the three-month period ended September 30, 2020, as compared to $996,777 for the prior-year period.

decrease in net loss is attributable primarily to the decrease in our operating expenses, as described above.

The increase is primarily attributable to hiring of new and augmented personnel to move forward our business agenda.

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.

expenses, net was approximately $8 thousand for the three-month period ended March 31, 2021, as compared to financing income of $22 thousand

for the prior-year period.

loss was $904 thousand for the three-month period ended March 31, 2021, as compared to $734 thousand for the prior-year period.

in net loss is attributable primarily to the decrease in our operating expenses, as described above.

and Capital Resources

of September 30, 2020, cash on hand was approximately $10.7 million as a result of our $15 million private placement which closed

during February 2020, for which we received net cash of approximately $13 million.

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 in excess of one year

from the date of this report.

In order to fund our anticipated liquidity needs beyond such period (or possibly earlier if our

current cash burn rate, strategy or operating plan change in a way that accelerates or increases our liquidity needs), we will

need to raise additional capital.

Avner Gal and Zvi Cohen collectively loaned Integrity Israel NIS 176,000 ($51,764 based on the exchange rate of 3.4 NIS/dollar

as of September 30, 2020) on May 15, 2002 pursuant to a board approval.

Nir Tarlovsky, Yitzhak Fisher and Asher Kugler

loaned Integrity Israel NIS 336,300 ($98,912 based on the same exchange rate) on March 16, 2004.

These loans are not required

to be repaid until the first year in which we realize profits in our annual statement of operations (accounting profit).

time, the loans are to be repaid on a quarterly basis in an amount equal to 10% of our total sales in the relevant quarter, beginning

on the quarter following the first year in which we realize profits in our annual statement of operations.

The total amount to

be repaid by us to each lender shall be an amount equal to the aggregate principal amount loaned by such lender to us, plus an

amount equal to the product of the amount of each payment made by us in respect of such loan multiplied by the percentage difference

between the Israeli Consumer Price Index on the date on which the loan was made and the Israeli Consumer Price Index on the date

of such payment.

However, notwithstanding the above-mentioned mechanism, we will not be required to repay the loans during any

time when such repayment would cause a deficit in our working capital.

Our Board of Directors is entitled to modify the repayment

terms of these loans, so long as such modification does not discriminate against any particular lender, and provided that all

payments must be allocated among the lenders on a pro-rata basis.

Israel is required to pay royalties to the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of the State

of Israel 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 $93,300, plus interest at LIBOR from the date of grant.

As of September 30, 2020, the contingent

liability with respect to royalty payment on future sales equaled approximately $34,000, excluding interest.

Cash Used in Operating Activities for the Nine-month Periods Ended September 30, 2020 and September 30, 2019

cash used in operating activities was $2,656,834 and $3,102,508 for the nine-month periods ended September 30, 2020 and 2019,

respectively.

Net cash used in operating activities primarily reflects the net loss for those periods of $1,816,957 and $2,917,287,

respectively.

Cash Used in Investing Activities for the Nine-month Periods Ended September 30, 2020 and September 30, 2019

cash used in investing activities was $45,900 and $22,554 for the nine-month periods ended September 30, 2020 and 2019, respectively,

and was used to purchase equipment (such as computers, research and development, and office equipment).

Cash Provided by Financing Activities for the Nine-month Periods Ended September 30, 2020 and September 30, 2019

cash provided by financing activities was $13,009,269 and $4,198,574 for the nine-month periods ended, September 30, 2020 and

2019, respectively.

Cash provided by financing activities for the nine-month period ended September 30, 2020 reflected net capital

raised from the February 2020 private placement and issuance of our common stock.

Cash provided by financing activities for the

nine-month period ended September 30, 2019, reflected net capital raised from the issuance of Series D Units.

of March 31, 2021, cash on hand was approximately $8.9 million as a result of our $15 million private placement which closed during February

2020, for which we received net cash of approximately $13 million.

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 in excess of one year from the date of this report.

In order to fund our anticipated liquidity needs beyond such period (or possibly earlier if our current cash burn rate, strategy or operating

plan change in a way that accelerates or increases our liquidity needs), we will need to raise additional capital.

Cash Used in Operating Activities for the Three-Month Periods Ended March 31, 2021 and March 31, 2020

cash used in operating activities was $933 thousand and $989 thousand for the three-month periods ended March 31, 2021 and 2020, respectively.

Net cash used in operating activities primarily reflects the net loss for those periods of $904 thousand and $734 thousand, respectively.

Cash Used in Investing Activities for the Three-Month Periods Ended March 31, 2021 and March 31, 2020

cash used in investing activities was $0 and $15 thousand for the three-month periods ended March 31, 2021 and 2020, respectively, and

was used to purchase equipment (such as computers, research and development, and office equipment).

Cash Provided by Financing Activities for the Three-Month Periods Ended March 31, 2021 and March 31, 2020

cash provided by financing activities was $0 and $13,009 thousand for the three-month periods ended, March 31, 2021 and 2020, respectively.

Cash provided by financing activities for the three-month period ended March 31, 2020 reflected net capital raised from the February

2020 private placement and issuance of our common stock.

Sheet Arrangements

of September 30, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Quantitative and Qualitative Disclosures About Market Risk.

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What changed 10-Q

Item 1. Financial Statements