Glucotrack, Inc. 10-Q

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