Glucotrack, Inc. 10-Q

Item 1. Financial Statements INTEGRITY APPLICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS In thousands of US dollars (except share data) September 30, 2021 December 31, 2020 (Unaudited) Assets Current Assets Cash and cash equivalents 7,000 9,823 Accounts receivable, net 66 66 Inventory 288 284 Other current assets 65 56 Total current assets 7,419 10,229 Operating lease right-of-use assets, net 65 166 Property and equipment, net 71 149 Non-current Restricted Cash 78 62 TOTAL ASSETS 7,633 10,606 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable 645 869 Operating lease liabilities, current 32 84 Other current liabilities 221 392 Total Current Liabilities 898 1,345 Non-current Liabilities Long-Term Loans from Stockholders 201 197 Operating lease liabilities, non-current 33 82 Total Non-current liabilities 234 279 Total Liabilities 1,132 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 September 30, 2021 and December 31, 2020 15 15 Additional paid-in capital 102,417 102,351 Accumulated other comprehensive income 4 15 Receipts on account of shares 25 - Accumulated deficit ( 95,960 ) ( 93,399 ) Total Stockholders’ equity 6,501 8,982 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 7,633 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 US dollars (except share data) US dollars (except share data) Nine-month period ended September 30, Three-month period ended September 30, (Unaudited) (Unaudited) 2021 2020 2021 2020 Research and development 1,077 1,268 447 476 Selling and marketing expenses 136 274 113 93 General and administrative 1,323 712 207 318 Total operating expenses 2,536 2,254 767 887 Operating Loss ( 2,536 ) ( 2,254 ) ( 767 ) ( 887 ) Other Income (expenses) ( 46 ) 338 ( 46 ) 338 Finance Income, net 21 99 9 40 Net Loss ( 2,561 ) ( 1,817 ) ( 804 ) ( 509 ) Other comprehensive expenses: Foreign currency translation adjustment ( 11 ) ( 24 ) ( 4 ) ( 18 ) Comprehensive loss for the period ( 2,572 ) ( 1,841 ) ( 808 ) ( 527 ) Net Loss per Common Share Basic ( 0.17 ) ( 0.12 ) ( 0.05 ) ( 0.03 ) Diluted ( 0.17 ) ( 0.12 ) ( 0.05 ) ( 0.03 ) Average number of common shares used in computing basic and diluted loss per share 15,448,923 14,947,139 15,451,726 15,425,968 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 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 12 89,155 - 124 ( 90,703 ) ( 1,412 ) Loss for the period - - - - - ( 1,817 ) ( 1,817 ) Other comprehensive loss - - - - ( 24 ) - ( 24 ) Amounts allocated to issuance of Common Stock 2,884,615 3 12,250 - - - 12,253 Issuance of shares as settlement of financial liabilities 100,818 - 120 48 - - 168 Warrants issued as consideration for placement agent services - - 756 - - - 756 Stock-based compensation - - 22 - - - 22 Balance at September 30, 2020 15,436,082 15 102,303 48 100 ( 92,520 ) 9,946 Balance at July 1, 2020 15,425,005 15 102,237 63 118 ( 92,011 ) 10,422 Loss for the period of three months - - - - - ( 509 ) ( 509 ) Other comprehensive loss - - - - ( 18 ) - ( 18 ) Issuance of shares as settlement of financial liabilities 11,077 - 57 ( 15 ) - - 42 Stock-based compensation - - 9 - - - 9 Balance at September 30, 2020 15,436,082 15 102,303 48 100 ( 92,520 ) 9,946 Balance at January 1, 2021 15,444,697 15 102,351 - 15 ( 93,399 ) 8,982 Loss for the period - - - - - ( 2,561 ) ( 2,561 ) Other comprehensive loss - - - - ( 11 ) - ( 11 ) Issuance of shares as settlement of financial liabilities - - - 25 - - 25 Stock-based compensation - - 66 - - - 66 Balance at September 30, 2021 15,444,697 15 102,417 25 4 ( 95,960 ) 6,501 Balance at July 1, 2021 15,444,697 15 102,409 10 8 ( 95,156 ) 7,286 Loss for the period - - - - - ( 804 ) ( 804 ) Other comprehensive loss - - - - ( 4 ) - ( 4 ) Issuance of shares as settlement of financial liabilities - - - 15 - - 15 Stock-based compensation - - 8 - - - 8 Balance at September 30, 2021 15,444,697 15 102,417 25 4 ( 95,960 ) 6,501 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 INTEGRITY APPLICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS US Dollars Nine-month period ended September 30. 2021 2020 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period $ ( 2,561 ) $ ( 1,817 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 33 35 Capital loss on sale of property and equipment 41 - Stock-based compensation 66 22 Linkage difference on principal of loans from stockholders 5 ( 1 ) Gain from settlement of liability to service provider - ( 338 ) Changes in assets and liabilities: Increase in inventory ( 6 ) ( 94 ) Increase in other current assets ( 9 ) ( 11 ) Decrease in accounts payable ( 223 ) ( 360 ) Decrease in other current liabilities ( 142 ) ( 93 ) Net cash used in operating activities ( 2,796 ) ( 2,657 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment 4 - Purchase of property and equipment ( 1 ) ( 46 ) Net cash provided by (used in) investing activities 3 ( 46 ) 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 ( 14 ) ( 18 ) Increase (decrease) in cash, cash equivalents, and restricted cash ( 2,807 ) 10,288 Cash, cash equivalents, and restricted cash at beginning of the period 9,885 476 Cash, cash equivalents, and restricted cash, end of period $ 7,078 $ 10,764 Supplementary information on financing activities not involving cash flows (unaudited): During the Nine months ending September 30, 2021 and 2020, the Company settled independent board members’ fees for the first nine month of 2020 and 2021 in the amount of approximately $ 168 and $ 25 thousand through the issuance of shares of common stock. During the Nine months ending September 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 September 30, 2021, the Company has an accumulated deficit of $ 95,960 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 September 30,2021, the company had cash and cash equivalents in the amount of approximately $ 7,000 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. 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. D. On September 27, 2021, the Company’s shelf registration statement on Form S-3 (file no. 333-259664) was declared effective by the SEC. The shelf registration statement permits the Company to register upto $ 100,000,000 of certain equity and debt securities of the Company via prospectus supplement. 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 nine months ended September 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 6,356,344 and 6,257,459 outstanding stock options and stock warrants have been excluded from the calculation of the diluted net loss per share for the periods of nine months ended September 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 Nine Months Ended September 30, 2021 (unaudited) Operating lease cost: Office space 86 Vehicles 32 118 Remaining Lease Term vehicles 2.29 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 September 30, 2021: SCHEDULE OF OPERATING LEASE MATURITY PAYMENTS US dollars September 30, 2021 (unaudited) Period: The remainder of 2021 8 2022 34 2023 29 Total operating lease payments 71 Less: imputed interest 6 Present value of lease liabilities 65 NOTE 4 – SUBSEQUENT EVENTS None. [to be updated if any before filing]. 10