Glucotrack, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number: 000-54785 INTEGRITY APPLICATIONS, INC. (Exact name of registrant as specified in its charter) Delaware 98-0668934 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 19 Ha’Yahalomim Street P.O. Box 12163 Ashdod , Israel L3 7760049 (Address of principal executive offices) (Zip Code) 972 (8) 675-7878 (Registrant’s telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of August 13, 2021, 15,444,738 shares of the Company’s common stock, par value $0.001 per share, were outstanding. INTEGRITY APPLICATIONS, INC. TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION 3 Item 1. Financial Statements. 3 Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations and Comprehensive Loss 4 Condensed Consolidated Statement of Changes in Stockholders’ Equity 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 15 Item 4. Controls and Procedures. 15 PART II - OTHER INFORMATION 16 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16 Item 6. Exhibits . 16 EXHIBIT INDEX 16 SIGNATURES 17 2 INTEGRITY APPLICATIONS, INC. PART I - FINANCIAL INFORMATION Item 1. Financial Statements INTEGRITY APPLICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 2021 December 31, 2020 In thousands of US dollars (except share data) June 30, 2021 December 31, 2020 (Unaudited) Assets Current Assets Cash and cash equivalents 7,892 9,823 Accounts receivable, net 66 66 Inventory 285 284 Other current assets 69 56 Total current assets 8,312 10,229 Operating lease right-of-use assets, net 100 166 Property and equipment, net 117 149 Non-current Restricted Cash 78 62 TOTAL ASSETS 8,607 10,606 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable 730 869 Operating lease liabilities, current 61 84 Other current liabilities 294 392 Total Current Liabilities 1,085 1,345 Non-current Liabilities Long-Term Loans from Stockholders 197 197 Operating lease liabilities, non-current 39 82 Total Non-current liabilities 236 279 Total Liabilities 1,321 1,624 Stockholders’ Equity Common Stock of $ 0.001 par value (“Common Stock”): 500,000,000 shares authorized; 15,444,697 shares issued and outstanding as of June 30, 2021 and December 31, 2020 201 201 Additional paid-in capital 102,223 102,165 Accumulated other comprehensive income 8 15 Receipts on account of shares 10 - Accumulated deficit ( 95,156 ) ( 93,399 ) Total Stockholders’ equity 7,286 8,982 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 8,607 10,606 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 INTEGRITY APPLICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2021 2020 2021 2020 US dollars (except share data) US dollars (except share data) Six-month period ended June 30, Three-month period ended June 30, (Unaudited) (Unaudited) 2021 2020 2021 2020 Research and development 630 792 321 379 Selling and marketing expenses 23 181 - 90 General and administrative 1,116 394 552 142 Total operating expenses 1,769 1,367 873 611 Operating Loss ( 1,769 ) ( 1,367 ) ( 873 ) ( 611 ) Finance Income, net 12 59 20 37 Net Loss ( 1,757 ) ( 1,308 ) ( 853 ) ( 574 ) Other comprehensive expenses: Foreign currency translation adjustment ( 7 ) ( 6 ) ( 29 ) ( 25 ) Comprehensive loss for the period ( 1,764 ) ( 1,314 ) ( 882 ) ( 599 ) Net Loss per Common Share Basic ( 0.11 ) ( 0.09 ) ( 0.06 ) ( 0.04 ) Diluted ( 0.11 ) ( 0.09 ) ( 0.06 ) ( 0.04 ) Average number of common shares used in computing basic and diluted loss per share 15,447,490 14,705,094 15,448,212 15,425,005 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 INTEGRITY APPLICATIONS, INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY Numbers of Shares Amount Paid-in Capital of shares Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity (Deficit) US Dollars (except share data) (Unaudited) Common Stock Additional Receipts on account Accumulated Other Total Stockholders’ Numbers of Shares Amount Paid-in Capital of shares Comprehensive Loss Accumulated Deficit Equity (Deficit) Balance at January 1, 2020 12,450,649 162 89,005 - 124 ( 90,703 ) ( 1,412 ) Loss for the period - - - - - ( 1,308 ) ( 1,308 ) Other comprehensive loss - - - - ( 6 ) - ( 6 ) Amounts allocated to issuance of Common Stock 2,884,615 38 12,215 - - - 12,253 Issuance of shares as settlement of financial liabilities 89,741 1 62 63 - - 126 Warrants issued as consideration for placement agent services - - 756 - - - 756 Stock-based compensation - - 13 - - - 13 Balance at June 30, 2020 15,425,005 201 102,051 63 118 ( 92,011 ) 10,422 Balance at April 1, 2020 15,335,264 200 101,977 64 143 ( 91,437 ) 10,947 Loss for the period of three months - - - - - ( 574 ) ( 574 ) Other comprehensive loss - - - - ( 25 ) - ( 25 ) Issuance of shares as settlement of financial liabilities 89,741 1 62 ( 1 ) - - 62 Stock-based compensation - - 12 - - - 12 Balance at June 30, 2020 15,425,005 201 102,051 63 118 ( 92,011 ) 10,422 Balance at January 1, 2021 15,444,697 201 102,165 - 15 ( 93,399 ) 8,982 Loss for the period - - - - - ( 1,757 ) ( 1,757 ) Other comprehensive loss - - - - ( 7 ) - ( 7 ) Issuance of shares as settlement of financial liabilities - - - 10 - - 10 Stock-based compensation - - 58 - - - 58 Balance at June 30, 2021 15,444,697 201 102,223 10 8 ( 95,156 ) 7,286 Balance at April 1, 2021 15,444,697 201 102,214 - 37 ( 94,303 ) 8,149 Loss for the period - - - - - ( 853 ) ( 853 ) Other comprehensive loss - - - - ( 29 ) - ( 29 ) Stock-based compensation - - 9 - - - 9 Issuance of shares as settlement of financial liabilities - - - 10 - - 10 Balance at June 30, 2021 15,444,697 201 102,223 10 8 ( 95,156 ) 7,286 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 INTEGRITY APPLICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 2021 2020 US Dollars Six-month period ended June 30. 2021 2020 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period $ ( 1,757 ) $ ( 1,308 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 22 23 Capital loss on sale of property and equipment 5 - Stock-based compensation 58 13 Linkage difference on principal of loans from stockholders 2 ( 1 ) Changes in assets and liabilities: Increase in accounts receivable ( 2 ) - Increase in inventory ( 6 ) ( 69 ) Increase in other current assets ( 13 ) ( 36 ) Decrease in accounts payable ( 121 ) ( 366 ) Decrease in other current liabilities ( 90 ) ( 148 ) Net cash used in operating activities ( 1,902 ) ( 1,892 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment 4 - Purchase of property and equipment ( 1 ) ( 15 ) Net cash provided by (used in) investing activities 3 ( 15 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock, net of cash issuance expenses - 13,009 Net cash provided by financing activities - 13,009 Effect of exchange rate changes on cash and cash equivalents, and restricted cash ( 16 ) ( 8 ) Increase (decrease) in cash, cash equivalents, and restricted cash ( 1,915 ) 11,094 Cash, cash equivalents, and restricted cash at beginning of the period 9,885 476 Cash, cash equivalents, and restricted cash, end of period $ 7,970 $ 11,570 Supplementary information on financing activities not involving cash flows (unaudited): During the six months ending June 30, 2021 and 2020, the Company settled independent board members’ fees for the first half of 2021 and 2020 in the amount of approximately $ 10 and $ 126 thousand through the issuance of shares of common stock. During the six months ending June 30, 2020, an amount of $ 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. The accompanying notes are an integral part of these condensed consolidated financial statements. 6 INTEGRITY APPLICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 – GENERAL A. Integrity Applications, Inc. (the “Company”) was incorporated on May 18, 2010 under the laws of the State of Delaware. On July 15, 2010, Integrity Acquisition Corp. Ltd. (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 Applications Ltd. (hereinafter: “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 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 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. B. Since 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. The Group has not yet generated significant revenues from operations, and therefore they are dependent upon external sources for financing their operations. As of June 30, 2021, the Company has an accumulated deficit of $ 95,156 thousand. In addition, in each year since its inception, the Company reported losses from operations and negative cash flows from operating activities 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 thousand. As of June 30,2021, the company had cash and cash equivalents in the amount of approximately $ 7,892 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. C. On August 13, 2021, the Company effected a reverse split of its Ordinary Shares in a ratio of 1 for 13 (the “Reverse Share Split”), see more details in Note 4. 7 INTEGRITY APPLICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of presentation Accounting Principles The 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. 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. 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. All such adjustments are of a normal recurring nature The results for the three and six months ended June 30, 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. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary. Significant intercompany balances and transactions have been eliminated in consolidation. Net Loss Per Share The 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). Diluted 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. An amount of 6,360,344 and 6,417,525 outstanding stock options and stock warrants have been excluded from the calculation of the diluted net loss per share for the periods of six months ended June 30, 2021 and 2020, respectively, because the effect of the common shares issuable as a result of the exercise of such instruments was determined to be anti-dilutive. 8 INTEGRITY APPLICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. Use of estimates in the preparation of financial statements The 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 interim financial statements, the most significant estimates and assumptions relate to the determination of net realizable value of inventory. C. Reclassified Amounts Certain 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 . NOTE 3 – LEASES The 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. Payments due under such lease contracts include primarily fix payments. 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. The company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease costs, lease term and discount rate are as follows: SCHEDULE OF LEASE COSTS, LEASE TERM AND DISCOUNT US dollars Six Months Ended June 30, 2021 (unaudited) Operating lease cost: Office space 57 Vehicles 23 80 Remaining Lease Term Office space 0.17 years vehicles 2.54 years Weighted Average Discount Rate Office space 10 % Vehicles 10 % 9 INTEGRITY APPLICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 3 – LEASES (cont.) The following is a schedule, by years, of maturities of operating lease liabilities as of June 30, 2021: SCHEDULE OF OPERATING LEASE MATURITY PAYMENTS US dollars June 30, 2021 (unaudited) Period: The remainder of 2021 45 2022 34 2023 29 Total operating lease payments 108 Less: imputed interest 8 Present value of lease liabilities 100 NOTE 4 – SUBSEQUENT EVENTS In connection with its application to list its shares on NASDAQ, on August 13, 2021, the Company effected a reverse split of its Ordinary Shares in a ratio of 1 for 13 (the “Reverse Share Split”). For accounting purposes, all Shares, options and warrants to purchase Ordinary Shares and loss per share amounts have been adjusted to give retroactive effect to this Reverse Share Split for all periods presented in these consolidated interim financial statements. Any fractional shares resulting from the Reverse Share Split were rounded up to the nearest whole share. 10 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Note Regarding Forward-Looking Statements This 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. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “may,” “will,” “could,” “would,” “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” 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 10-Q. Overview Incorporated in Delaware in May 2010, 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 and pre-diabetics. On July 15, 2010, we completed a reverse triangular merger with Integrity Israel and Integrity Acquisition Corp. Ltd., an Israeli corporation and a wholly owned subsidiary of ours, pursuant to which Integrity Acquisition Corp. Ltd. merged with and into Integrity Israel and all of the stockholders and option holders of Integrity Israel became entitled to receive shares and options in us in exchange for their shares and options in Integrity Israel (the “Reorganization”). Following the Reorganization, the former equity holders of Integrity Israel were entitled to the same proportional ownership in us as they had in Integrity Israel prior to the Reorganization. As a result of the Reorganization, Integrity Israel became a wholly owned subsidiary of ours. We operate primarily through Integrity Israel. 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 glucose monitor, the GlucoTrack® glucose monitoring device, which is designed to help people with diabetes and pre-diabetics obtain glucose level readings without the pain, inconvenience, cost and difficulty of conventional (invasive) spot finger stick devices. The first generation GlucoTrack® (“GlucoTrack 1.0”) utilizes a patented combination of ultrasound, electromagnetic and thermal technologies to obtain 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 or interstitial fluid. We 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 diabetes. In addition to being a critical and effective management tool for the end user, we believe that third parties such as insurers, pharmaceutical companies and advertisers would be willing to pay for the de-identified data that we will obtain through our platform, and that this is an opportunity for us to develop an additional revenue source. After a short calibration process of approximately thirty minutes and consisting of three invasive reference measurements, GlucoTrack 1.0 can be used to non-invasively measure glucose levels for six months before a user is required to repeat the calibration process. The entire calibration process can be performed by the user themselves without the need for a trained calibrator. We believe the simple-to-perform calibration, as well as the infrequency of the required re-calibration are significant advantages over our competition. GlucoTrack 1.0 has 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® 1.0 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. The intended use for GlucoTrack 1.0 received by the Notified Body is for both those with Type 2 diabetes as well as those suffering from pre-diabetes. Receipt of the CE Mark allows us to market and sell GlucoTrack® 1.0 glucose monitoring device in EU member countries that have adopted the European Medical Device Directive (the “MDD”) without being subject to additional national regulations with regard to demonstration of performance and safety. However, although the MDD is applicable throughout the EU, in practice it does not ensure uniform regulation throughout the EU. Accordingly, member countries may apply and enforce the MDD’s terms differently, and certain EU member countries may request or require performance and/or safety data in addition to the MDD’s requirements from time to time, on a case-by-case basis. The CE Mark also permits the sale in countries that have an MDD Mutual Recognition Agreement with the EU. This would include some countries in South East Asia as well as in Latin America, opening new potential markets for Integrity on a global basis. Safety 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. ISO 13485, is an internationally agreed standard that sets out the requirements for a quality management system specific to the medical devices industry. On February 19, 2016, we received an extension of our ISO 13485:2003 certificate and Annex II certification from the EU. 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 home use. Annex II also addresses quality control systems. The certification allows us to self-certify certain modifications and changes and simplifies some of the reporting to and review by the relevant Notified Body. This can shorten the CE-mark review process of future GlucoTrack® enhancements or revisions, including software updates and other improvements of the 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® devices. Clinical trials conducted in Germany by Pfutzner Science & Health Institute, GmbH, headed by Prof. Dr. Andreas Pfutzner, on subjects with Type 2 diabetes and pre-diabetes, as well as at Soroka University Medical Center, Beer-Sheva, Israel, demonstrated favorable results. Results from the trials show 99.7% of the study data points within the clinically accepted A and B zones of the Consensus Error Grid (which is a new tool for evaluating the accuracy of a blood glucose meter) (Type 2), 99.3% of the study data points were within the clinically accepted A and B zones of the Clarke Error Grid (which is a tool used to quantify the clinical accuracy of blood glucose estimates generated by meters as compared to a reference value), 17.0% Mean Absolute Relative Difference, and 12.9% Median Absolute Relative Difference. In addition, the German trial concluded that the data confirms the performance of the GlucoTrack® among its intended users, including pre-diabetic patients. In addition, the Company has demonstrated (1) the GlucoTrack® algorithm, which compensates for the tissue-lagging effect relative to blood glucose changes post-meal intake, significantly improves GlucoTrack® accuracy at different post-prandial (post- meal) states, and equalizes accuracy for pre- and post-meal glucose readings; (2) GlucoTrack® clinical accuracy as measured by Consensus Error Grid (CEG) showed 100% of the pre-prandial readings in the A+B zones, and 98.2% of the post-prandial readings in the A+B zones; (3) GlucoTrack® 1.0 demonstrates consistent glucose measurement repeatability between different GlucoTrack® devices and on each earlobe of the same subject; (4) the repeatability of different GlucoTrack® devices is similar at all tested glucose ranges and post-prandial time periods; and (5) the GlucoTrack® mean precision absolute relative difference (PARD) of 8.2% is equivalent or better than the independently reported PARD values of commercially available continuous glucose monitoring systems. 11 The Company conducted a study that evaluated GlucoTracker accuracy in 172 adults with type 2 diabetes who were prescribed one or more medications for major medical conditions associated with diabetes and presented key findings of this study at the European Association for the Study of Diabetes Congress (EASD) in Lisbon, Portugal. The experiment stratified participants into five medication groups, focusing on anti-cholesterolemia, anti-hypertension, anti-thrombotic, and anti-diabetic (prolonged duration and short and mixed duration) medications. The study demonstrated that the use of these common concomitant medications in diabetes had no effect on the performance of GlucoTrack®. In 2018, the Company presented at the 11th International Conference on Advanced Technologies & Treatments for Diabetes (ATTD 2018) in Vienna, Austria. The Company presented data on the performance of a non-invasive glucose monitoring device (GlucoTrack®) with regard to accuracy and precision. Device accuracy data was presented for 37 people with type 2 diabetes using the consensus error grid analysis for type 2 diabetes and measuring the median absolute relative difference (ARD). The results showed that 99.6% of 257 measurements were in zones A and B of the Consensus error grid, with 90.3% of the measurements in zone A, the mean and median ARD were 17.2% and 12.9%, respectively, and at various glucose levels, mean PARD ranged from 7.7%-8.7%. Data was also presented on sensor to sensor precision in 20 people with type 2 diabetes where ~19 simultaneous measurements using two GlucoTrack® devices, one on each earlobe. The results show that GlucoTrack® is highly accurate with sensor-to-sensor precision is comparable to that of CGMs (GlucoTrack: 8.1%, Dexcom G6: 9.0%, Freestyle Navigator: 9.6%). The Company had begun the implementation of a proof of concept pilot program for GlucoTrack 1.0 in the Netherlands, a country chosen based on the relatively smaller size of the marketplace to allow us to be able to rapidly assess our performance and make adjustments as necessary. We have been working closely with our exclusive distributor in the Netherlands, Medireva B.V., and have accomplished product and disease area training across the organization and segmentation of the local target audiences including key opinion leaders, treating physicians, and diabetes nurses. The most important aspect of our pilot program in the Netherlands are the discussions 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. The Company has made progress with several of these companies on initial programs with GlucoTrack 1.0 as an important step towards reimbursement approval. Talent development, recruiting and organizational health have been a critical focus of the Company over the last 12 months. A number of high-quality individuals have joined the Company, each of whom bring extensive experience in their respective fields. We have bolstered our Senior Management with the recruitment of Erez Ben-Zvi, a highly experienced MedTech development professional who joined us last year as Vice President of Product, and recently took on the additional role of General Manager, and Shalom Shushan, a seasoned executive who joined us as Chief Technology Officer. We added two new independent directors; Paul V. Goode PhD, who has a decorated career developing innovative medical technologies, including at DexCom and MiniMed, and Luis J. Malavé, formerly of Insulet Corp, Medtronic and MiniMed. Several highly talented and accomplished executives joined the Company as senior advisors to the Board. These include Yair Briman, the former CEO of Philips Healthcare Informatics, Daniel McCaffrey MBA MA, a world-renowned behavioral scientist and digital health expert currently at Samsung Health and formerly of Dexcom, Dr. Alexander Raykhman PhD, a measurement and artificial intelligence expert and Dr. David C. Klonoff, world renowned endocrinologist and diabetes technology thought leader. We intend to continue to invest in our talent and to expand and strengthen all areas within the company. Recently, the Company performed a top-down analysis of the GlucoTrack 1.0 model to identify areas of potential enhancement, as it relates to the platform, integrations, sensor technologies, accuracy as well as costs to manufacture. The result of this comprehensive review is an accelerated development plan for GlucoTrack 2.0. GlucoTrack 2.0 will be a completely wireless and rechargeable earclip to be paired with a smartphone, with more capabilities and features, increased accuracy, significantly greater margins for the Company and lower cost to the end-user as compared to GlucoTrack 1.0. As previously reported, the Company has made significant progress towards receiving insurance reimbursement in the Netherlands. With the new accelerated development plan for GlucoTrack 2.0, with all of the expected advantages over GlucoTrack 1.0, it made clear to the Company that introducing GlucoTrack 2.0 rather than the GlucoTrack 1.0 would serve the diabetes market and the Company more effectively. We are currently working with our European partners on the roadmap for distribution of GlucoTrack 2.0 when completed and ready to market. In addition to the European markets, the Company is now focused on the U.S. market as well, including building out its U.S. go-to-market strategy and planning the required FDA clinical trials and field testing to support its entrance into the market. The Company is currently in the process of identifying clinical sites in the U.S., interviewing Contract Research Organizations (CRO’s), and forming its Scientific and Medical Advisory Boards. We intend to build out a team to support the U.S. activities, while continuing our technology development in our R&D facility located in Israel. 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. 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. 12 Results of Operations The following discussion of our operating results explains material changes in our results of operations for the three and six months period ended June 30, 2021 compared with the same period ended June 30, 2020. The discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report. Three Months ended June 30, 2021 compared to Three Months ended June 30, 2020 Revenues During the three-month period ended June 30, 2021, we had no revenues. Research and development expenses Research and development expenses were $321 thousand for the three-month period ended June 30, 2021, as compared to $379 thousand for the prior-year period. The decrease is immaterial. Research 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, development of new GlucoTrack® models and others. Selling and marketing expenses Selling and marketing expenses were $0 thousand for the three-month period ended June 30, 2021, as compared to $90 thousand for the prior-year period. The decrease is attributable to the occurrence of no sales and marketing activities in the second quarter of 2021 . Selling and marketing expenses consist primarily of professional services, salaries, travel expenses and other related expenses. General and administrative expenses General and administrative expenses were $552 thousand for the three-month period ended June 30, 2021, as compared to $142 thousand for the prior-year period. The increase is primarily attributable to hiring of new and augmented personnel to move forward our business agenda. 13 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, net Financing income, net was approximately $20 thousand for the three-month period ended June 30, 2021, as compared to financing income of $37 thousand for the prior-year period. The decrease is immaterial. Net Loss Net loss was $853 thousand for the three-month period ended June 30, 2021, as compared to $574 thousand for the prior-year period. The increase in net loss is attributable primarily to the decrease in our operating expenses, as described above. Six Months ended June 30, 2021 compared to Six Months ended June 30, 2020 Revenues During the six-month period ended June 30, 2021, we had no revenues. Research and development expenses Research and development expenses were $630 thousand for the six-month period ended June 30, 2021, as compared to $792 thousand for the prior-year period. The decrease is immaterial. Research 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, development of new GlucoTrack® models and others. Selling and marketing expenses Selling and marketing expenses were $23 thousand for the six-month period ended June 30, 2021, as compared to $181 thousand for the prior-year period. The decrease is attributable to the occurrence of minimal sales and marketing activities in 2021 . Selling and marketing expenses consist primarily of professional services, salaries, travel expenses and other related expenses. General and administrative expenses General and administrative expenses were $1,116 thousand for the six-month period ended June 30, 2021, as compared to $394 thousand for the prior-year period. The increase is primarily attributable to hiring of new and augmented personnel to move forward our business agenda. 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, net Financing expenses, net was approximately $12 thousand for the six-month period ended June 30, 2021, as compared to financing income of $59 thousand for the prior-year period. The decrease is immaterial. Net Loss Net loss was $1,757 thousand for the six-month period ended June 30, 2021, as compared to $1,308 thousand for the prior-year period. The increase in net loss is attributable primarily to the decrease in our operating expenses, as described above. 14 Liquidity and Capital Resources As of June 30, 2021, cash on hand was approximately $8 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. Net Cash Used in Operating Activities for the Six-Month Periods Ended June 30, 2021 and June 30, 2020 Net cash used in operating activities was $1,902 thousand and $1,892 thousand for the six-month periods ended June 30, 2021 and 2020, respectively. Net cash used in operating activities primarily reflects the net loss for those periods of $1,757 thousand and $1,308 thousand, respectively. Net Cash Used in Investing Activities for the Six-Month Periods Ended June 30, 2021 and June 30, 2020 Net cash used (provided) in investing activities was $(3) and $15 thousand for the six-month periods ended June 30, 2021 and 2020, respectively, and was used mostly to purchase equipment (such as computers, research and development, and office equipment). Net Cash Provided by Financing Activities for the Six-Month Periods Ended June 30, 2021 and June 30, 2020 Net cash provided by financing activities was $0 and $13,009 thousand for the six-month periods ended June 30, 2021 and 2020, respectively. Cash provided by financing activities for the three-month period ended June 30, 2020 reflected net capital raised from the February 2020 private placement and issuance of our common stock. Off-Balance Sheet Arrangements As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not required for smaller reporting companies. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2021, our President and Interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 15 PART II - OTHER INFORMATION Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Private Placement On February 14, 2020, we entered into a Securities Purchase Agreement and Registration Rights Agreement with an accredited investor, pursuant to which the accredited investor purchased 2,884,615 shares (post adjustment to reflect the effect of the reverse stock split described in Note 4 to part I - FINANCIAL INFORMATION) per share, for an aggregate gross purchase price of $15,000 thousand. Placement Agent Compensation In the first quarter of 2020, Andrew Garrett was paid $1,950 thousand in fees in connection therewith, and issued a warrant to purchase 288,462 shares (post adjustment to reflect the effect of the reverse stock split described in Note 4 to part I - FINANCIAL INFORMATION) to the placement agent with terms similar to the terms of the Placement Agent Warrants issued in 2019. Item 3. Defaults Upon Senior Securities None Item 4. Mine Safety Disclosures None Item 6. Exhibits. Exhibit No. Description 31.1 Certification of Principal Executive Officer and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Principal Executive Officer and Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document (2) 101.SCH XBRL Schema Document (2) 101.CAL XBRL Calculation Linkbase Document (2) 101.LAB XBRL Label Linkbase Document (2) 101.PRE XBRL Presentation Linkbase Document (2) 101.DEF XBRL Definition Linkbase Document (2) 104 Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 16, 2021 INTEGRITY APPLICATIONS, INC. By: /s/ Jolie Kahn Name: Jolie Kahn Title Interim Chief Financial Officer (Principal Executive and Financial Officer) 17