UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017Quarterly Period Ended: March 31, 2021
Oror
[ ] | 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: 000-55680
TechCare Corp.CITRINE GLOBAL, CORP.
(Exact Name Of Registrant As Specified In Its Charter)
Delaware | 68-0080601 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) | (ZIP Code) |
+ (972) 73 7600341 |
Registrant’s Telephone Number, Including Area Code: |
Registrant’s Telephone Number, Including Area Code: + (972) 3 750-3060 or (646) 380-6645
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
- | - | - |
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 [X] 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). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, (as defineda 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 ruleRule 12b-2 of the Exchange Act), or a smaller reporting company.Act.
Large accelerated filer [ ] | Accelerated filer [ ] | Non-Accelerated filer | Smaller reporting company [X] | |||
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 new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
On November 9, 2017,May 14, 2021, the Registrantregistrant had 21,817,544942,568,006 shares of common stock, par value $0.0001 per share, outstanding.
TABLE OF CONTENTS
CITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
TechCare Corp.CITRINE GLOBAL, CORP.
Condensed Consolidated Balance SheetsCONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2017(U.S. dollars except share and December 31, 2016
(Unaudited)per share data)
September 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 84,282 | $ | 275,041 | ||||
Other receivables | 160,620 | 23,069 | ||||||
Total current assets | 244,902 | 298,110 | ||||||
Non-current assets: | ||||||||
Severance pay fund | 10,403 | 5,988 | ||||||
Long-term deposits | 12,071 | 5,670 | ||||||
Property and equipment, net | 99,744 | 100,841 | ||||||
Total non-current assets | 122,218 | 112,499 | ||||||
Total assets | $ | 367,120 | $ | 410,609 | ||||
Liabilities and Stockholders’ Equity (Capital Deficiency) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 137,780 | $ | 203,962 | ||||
Option liability | 182,720 | - | ||||||
Notes payable | 87,192 | 80,026 | ||||||
Total current liabilities | 407,692 | 283,988 | ||||||
Non-current liability: | ||||||||
Liability for severance pay | 21,184 | 12,663 | ||||||
Total liabilities | 428,876 | 296,651 | ||||||
Commitments | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized: none issued and outstanding at September 30, 2017 and December 31, 2016 | - | - | ||||||
Common stock, par value $0.0001 per share, 500,000,000 shares authorized: 21,776,762 and 20,381,211 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 2,177 | 2,038 | ||||||
Accumulated other comprehensive income | 107,061 | 97,003 | ||||||
Additional paid-in capital | 6,970,542 | 3,727,610 | ||||||
Stock payable | 48,964 | - | ||||||
Accumulated deficit | (7,190,500 | ) | (3,712,693 | ) | ||||
Total stockholders’ equity (capital deficiency) | (61,756 | ) | 113,958 | |||||
Total liabilities and stockholders’ equity (capital deficiency) | $ | 367,120 | $ | 410,609 |
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | 289,101 | 206,278 | ||||||
Prepaid share based payment to a service provider | - | 1,736,534 | ||||||
Trading securities | 520,107 | 521,615 | ||||||
Short-term loan measured at fair value | - | 165,185 | ||||||
Other current assets | 12,805 | 19,414 | ||||||
Total Current assets | 822,013 | 2,649,026 | ||||||
Non-current assets | ||||||||
Investments valued under the measurement alternative | 450,000 | 450,000 | ||||||
Property and equipment, net | 5,018 | 5,502 | ||||||
Total non-current assets | 455,018 | 455,502 | ||||||
Total assets | 1,277,031 | 3,104,528 | ||||||
Liabilities and Shareholders’ Equity (Deficit) | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | 632,315 | 476,199 | ||||||
Fair value of a liability in connection with stock exchange agreement | 94,703 | 71,722 | ||||||
Convertible component in convertible notes | 368,114 | 381,147 | ||||||
Convertible notes | 879,455 | 772,602 | ||||||
Total current liabilities | 1,974,587 | 1,701,670 | ||||||
Total liabilities | 1,974,587 | 1,701,670 | ||||||
Stockholders’ Deficit | ||||||||
Common stock, par value $0.0001 per share, 1,500,000,000 shares authorized at March 31, 2021 and December 31, 2020; 942,568,006 shares issued and outstanding at March 31, 2021 and December 31, 2020 | 94,256 | 94,256 | ||||||
Additional paid-in capital | 20,414,217 | 20,414,217 | ||||||
Stock to be issued | 30,000 | 30,000 | ||||||
Accumulated deficit | (21,341,865 | ) | (19,241,451 | ) | ||||
Accumulated other comprehensive income | 105,836 | 105,836 | ||||||
Total stockholders’ equity (deficit) | (697,556 | ) | 1,402,858 | |||||
Total liabilities and stockholders’ equity (deficit) | 1,277,031 | 3,104,528 |
The accompanying notes are an integral part of thesethe condensed consolidated financial statements.
TechCare Corp.
Condensed Consolidated Statements of Operations
and Comprehensive loss
(Unaudited)
For the three | For the three | For the nine | For the nine | |||||||||||||
months ended | months ended | months ended | months ended | |||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||
Restated | Restated | |||||||||||||||
Research and development expenses | 131,765 | 303,597 | 872,874 | 782,231 | ||||||||||||
Change in fair value of option liability | (93,430 | ) | - | 182,720 | - | |||||||||||
General and administrative expenses | 361,342 | 544,747 | 2,441,860 | 636,911 | ||||||||||||
Operating loss | 399,677 | 848,344 | 3,497,454 | 1,419,142 | ||||||||||||
Financial expenses (income), net | (5,305 | ) | 42,335 | (24,495 | ) | 43,064 | ||||||||||
Loss before income taxes | 394,372 | 890,679 | 3,472,959 | 1,462,206 | ||||||||||||
Tax expenses | - | - | 4,848 | - | ||||||||||||
Net loss | $ | 394,372 | $ | 890,679 | $ | 3,477,807 | $ | 1,462,206 | ||||||||
Net loss per common stock: | ||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.16 | ) | $ | (0.10 | ) | ||||
Diluted | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.16 | ) | $ | (0.10 | ) | ||||
Weighted average number of common stock outstanding: | ||||||||||||||||
Basic | 21,752,409 | 17,527,020 | 21,722,199 | 15,066,978 | ||||||||||||
Diluted | 22,018,967 | 17,527,020 | 21,722,199 | 15,066,978 | ||||||||||||
Comprehensive loss: | ||||||||||||||||
Net loss | 394,372 | 890,679 | 3,477,807 | 1,462,206 | ||||||||||||
Other comprehensive loss (income) attributable to foreign currency translation | 2,344 | 148,737 | (10,058 | ) | 150,212 | |||||||||||
Comprehensive loss | 396,716 | 1,039,416 | 3,467,749 | 1,612,418 |
4 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars except share and per share data)
Three months ended | ||||||||
March 31 | ||||||||
2021 | 2020 | |||||||
(Unaudited) | ||||||||
Revenues | - | 11,372 | ||||||
Cost of revenues | - | (13,621 | ) | |||||
Gross loss | - | (2,249 | ) | |||||
Research and development expenses | - | (17,586 | ) | |||||
Marketing, general and administrative expenses | (1,974,725 | ) | (667,671 | ) | ||||
Operating loss | (1,974,725 | ) | (691,502 | ) | ||||
Financing income (expenses), net | (125,689 | ) | 2,753 | |||||
Net loss attributable to common stockholders | (2,100,414 | ) | (688,749 | ) | ||||
Loss per common stock (basic) | (0.00 | ) | (0.00 | ) | ||||
Basic weighted average number of shares of common stock outstanding | 942,568,006 | 174,610,261 | ||||||
Comprehensive loss: | ||||||||
Net loss | (2,100,414 | ) | (688,749 | ) | ||||
Other comprehensive expense attributable to foreign currency translation | - | (9,652 | ) | |||||
Comprehensive loss | (2,100,414 | ) | (698,401 | ) |
The accompanying notes are an integral part of thesethe condensed consolidated financial statements.
TechCare Corp.
Condensed Consolidated Statements of Cash Flows
For the Nine-Months Periods Ended September 30, 2017 and 2016
(Unaudited)
For the nine | For the nine | |||||||
months ended | months ended | |||||||
September 30, 2017 | September 30, 2016 | |||||||
Restated | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (3,477,807 | ) | $ | (1,462,206 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | (727,113 | ) | ||||||
Depreciation | 10,193 | 9,233 | ||||||
Stock issued in relation to consulting services | 70,964 | - | ||||||
Change in fair value of option liability | 182,720 | - | ||||||
Stock-based compensation | 2,166,821 | 441,603 | ||||||
Changes in cash attributed to changes in operating assets and liabilities: | ||||||||
Other receivables and prepaid expenses | 36,810 | 63,194 | ||||||
Accounts payable and accrued expenses | (60,512 | ) | 60,481 | |||||
Liability for severance pay | 5,229 | - | ||||||
Net cash used in operating activities | (1,065,582 | ) | (887,695 | ) | ||||
Cash flow from investing activities: | ||||||||
Severance pay fund | (1,592 | ) | - | |||||
Purchase of fixed assets | (4,170 | ) | (40,717 | ) | ||||
Investment in short-term deposit | - | (13,565 | ) | |||||
Investment in long-term deposit | (6,059 | ) | (5,798 | ) | ||||
Net cash used in investing activities | (11,821 | ) | (60,080 | ) | ||||
Cash flow from financing activities: | ||||||||
Proceeds from issuance of common stock | 878,250 | 166,532 | ||||||
Proceeds of funds on account of reverse merger | - | 1,144,930 | ||||||
Net cash provided by financing activities | 878,250 | 1,311,462 | ||||||
Translation adjustments on cash and cash equivalents | 8,394 | 54,731 | ||||||
Net increase (decrease) in cash and cash equivalents | (190,759 | ) | 418,418 | |||||
Cash and cash equivalents - beginning of period | 275,041 | 254,324 | ||||||
Cash and cash equivalents - end of period | $ | 84,282 | $ | 672,742 | ||||
Non-cash financing activity during the period: | ||||||||
Issuance of common stock and warrants | $ | 194,995 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5 |
TechCare Corp.
Notes to Unaudited Financial Statements
September 30, 2017 (Unaudited)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESCITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(U.S. dollars, except share and per share data)
Redeemable convertible preferred stock | Common stock | Additional paid-in capital | Stock to be issued | Accumulated deficit | Accumulated other comprehensive income | Total stockholders’ | ||||||||||||||||||||||||||||||
Stock | Amount | Stock | Amount | |||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2019 | 10,344,828 | 300,000 | 35,449,400 | 3,545 | 10,042,496 | 30,000 | (10,602,292 | ) | 115,488 | (410,763 | ) | |||||||||||||||||||||||||
CHANGES DURING THE PERIOD OF THREE MONTHS ENDED MARCH 31, 2020: | ||||||||||||||||||||||||||||||||||||
Conversion preferred stock to common stock | (10,344,828 | ) | (300,000 | ) | 10,344,828 | 1,034 | 298,966 | - | - | - | 300,000 | |||||||||||||||||||||||||
Issuance of common stock and warrants | - | - | 433,927,587 | 43,393 | 28,607 | - | - | - | 72,000 | |||||||||||||||||||||||||||
Issuance of common stock for services | - | - | 15,000,000 | 1,500 | 4,783,500 | - | - | - | 4,785,000 | |||||||||||||||||||||||||||
Waiver of fee by related part | - | - | - | - | 11,417 | - | - | - | 11,417 | |||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | - | - | - | (9,652 | ) | (9,652 | ) | |||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | (688,749 | ) | - | (688,749 | ) | |||||||||||||||||||||||||
BALANCE AT MARCH 31, 2020 (unaudited) | - | - | 494,721,815 | 49,472 | 15,164,986 | 30,000 | (11,291,041 | ) | 105,836 | 4,059,253 |
Redeemable convertible preferred stock | Common stock | Additional paid-in capital | Stock to be issued |
Accumulated deficit | Accumulated other comprehensive income | Total stockholders’ | ||||||||||||||||||||||||||||||
Stock | Amount | Stock | Amount | |||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | - | - | 942,568,006 | 94,256 | 20,414,217 | 30,000 | (19,241,451 | ) | 105,836 | 1,402,858 | ||||||||||||||||||||||||||
CHANGES DURING THE PERIOD OF THREE MONTHS ENDED MARCH 31, 2021: | ||||||||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | (2,100,414 | ) | - | (2,100,414 | ) | |||||||||||||||||||||||||
BALANCE AT MARCH 31, 2021 (unaudited) | - | - | 942,568,006 | 94,256 | 20,414,217 | 30,000 | (21,341,865 | ) | 105,836 | (697,556 | ) |
A. NatureCITRINE GLOBAL, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars, except share and per share data)
Three months ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
(Unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | (2,100,414 | ) | (688,749 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 484 | 6,664 | ||||||
Right of use asset depreciation | - | 1,278 | ||||||
Interest and change in fair value of short-term loan measured at fair value | 1,459 | |||||||
Interest with respect to convertible notes and loans | 93,820 | |||||||
Inventory subject to refund | - | 1,299 | ||||||
Net investment in right of use asset | - | (2,205 | ) | |||||
Share based payment to a service provider | 1,736,534 | 478,500 | ||||||
Management fee waiver | - | 11,417 | ||||||
Fair value adjustment of liability in connection with stock exchange agreement | 22,981 | |||||||
Changes in fair value of marketable securities | 1,508 | |||||||
Changes in operating assets and liabilities: | - | |||||||
Accounts receivable | - | (5,714 | ) | |||||
Other current assets | 6,609 | (6,410 | ) | |||||
Inventory | - | 6,789 | ||||||
Accounts payable and accrued expenses | 156,116 | (21,342 | ) | |||||
Net cash used in operating activities | (80,903 | ) | (218,473 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Repayments of short-term loan investment | 163,726 | - | ||||||
Net cash provided by (used in) investing activities | 163,726 | - | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from related party loans | - | 154,341 | ||||||
Proceeds from issuance of common stock, net | - | 72,000 | ||||||
Net cash provided by (used in) financing activities | - | 226,341 | ||||||
Effect of exchange rates on cash and cash equivalents | - | (11,494 | ) | |||||
Net increase in cash and cash equivalents | 82,823 | (3,626 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 206,278 | 17,636 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 289,101 | 14,010 | ||||||
Supplemental disclosure of cash flow information: | ||||||||
Non-cash transactions: | ||||||||
Conversion preferred stock to common stock | - | 300,000 |
The accompanying notes are an integral part of operationsthe condensed consolidated financial statement
TechcareNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 - GENERAL
Citrine Global, Corp. (“Techcare”, the “Registrant”Citrine Global” or the “Company”“Company”), formally known as BreedIT Corp. (“BreedIt”), was incorporated under the laws of the State of Delaware on May 26, 2010. The Company’s common stock is traded in the United States on the OTCQB Marketmarket under the ticker symbol “TECR”.“CTGL.”
On February 8, 2016,August 20, 2020, CTGL - Citrine Global Israel Ltd., the Company’s Israeli subsidiary (the “Israeli Subsidiary), Beezz Home Technologies Ltd., and Golden Holdings Neto Ltd. incorporated Cannovation Center Israel Ltd. Israeli Subsidiary holds 60% of Cannovation Center Israel Ltd.’s shares, while each of Beezz Home Technologies Ltd. and Golden Holdings Neto Ltd. holds 20% of its shares.
On November 22, 2020, certain of the Company’s stockholders representing more than 50% of the Company’s outstanding share capital (the “Majority Consenting Stockholders”) approved an amendment to the Company’s Certificate of Incorporation (the “Reverse Stock Split Certificate of Amendment”) in order to effect a reverse stock split of the Company’s common stock pursuant to a range of between 40-to-1 and 100-to-1 (the “Reverse Stock Split”). Pursuant to the Reverse Stock Split, each forty or one hundred shares of common stock, as shall be determined by the Board at a later time, will be automatically converted, without any further action by the stockholders, into one share of common stock. No fractional shares of common stock will be issued as the result of the Reverse Stock Split. Instead, each stockholder of the Company signed a Merger Agreementwill be entitled to receive one share of common stock in lieu of the fractional share that would have resulted from the Reverse Stock Split. In addition, the Majority Consenting Stockholders also approved the elimination of the Company’s entire authorized class of fifty million (50,000,000) undesignated preferred stock, thereby reducing the total number of shares of capital stock that the Company may issue from one billion five hundred fifty-thousand (1,550,000,000) shares to one billion five hundred thousand (1,500,000,000) shares, all of which are designated as common stock (the “Certificate of Elimination”). The Certificate of Elimination will be effective upon the filing with Novomic Ltd. (“Novomic”), a private company incorporated under the lawsSecretary of the State of Israel. The closingDelaware, which was not completed as of the merger took place on August 9, 2016 pursuant to which Novomic became a wholly-owned subsidiarydate of this report’s filing. The Reverse Stock Split Certificate of Amendment will be effective upon receipt of approval from the Financial Industry Regulatory Authority (“FINRA”) and the filing with the Secretary of the Company. The merger was structuredState of Delaware, both of which were not completed as a reverse merger.of the date of the approval of the financial statements.
On December 30, 2020, the Ministry of the Economy of the Israeli government approved the grant of 10,000 square meters of industrial land in the Yeruham Biopharma Park to Cannovation Center Israel for building the Cannovation Center, that will include factories, laboratories, logistics and a distribution center for the medical cannabis, CBD, hemp and botanicals industries.
On August 23, 2017, the Company entered into a binding memorandum of understanding (the “MOU”) with Naturalicious Holdings B.V.April 13, 2021, Citrine S A L Investment & Holding Ltd., a Dutch corporation (including its subsidiaries, “Natur”), pursuant to which the Company will acquire certain assets, operations and activities of Natur, in consideration for which the Company will issue a number of shares of common stock, par value $0.0001 per share representing fifty percent (50%) of the Company’s issued and outstanding common stock, on a fully diluted basis. The parties have agreed to use commercially reasonable efforts to negotiate and execute a definitive agreement within thirty (30) days of the execution of the MOU and subsequent closing of the aforesaid transactions (the “Closing”). In connection with the transaction, the parties shall enter into a separate stockholders’ agreement pursuant to which the board of directorsmajor shareholder of the Company, on behalf of itself and its affiliates and related parties, has furnished the Company with an irrevocable letter of obligation to financially support the Company until June 30, 2022 that will allow the Company to be operational as planned and budgeted through this period (the “Board”“Irrevocable Letter”), following the closing, will be comprised of six (6) directors, three (3) of whom shall be nominated for election by the controlling stockholders of Natur and three (3) of whom shall be nominated for election by.
Based on the Company’s current controlling stockholders. The MOU may be terminated by either party incash balances and the event definitive agreements are not executed by the parties within eighty (80) days of the execution of the MOU.
Also, on August 23, 2017,Irrevocable Letter, the Company announcedbelieves it has sufficient funds for its plans for the appointment of Mr. Shlomi Arbel as the Company’s Chief Executive Officer, effective as of that date. Mr. Arbel, a member of the management team of the Company and Novomic, succedes Mr. Zvi Yemini who remained the chairman of the Board.
Going Concern
During the nine months period ended September 30, 2017, the Company had a comprehensive loss of approximately $3.5 million (out of which $2.2 million is related to stock-based compensation). As of September 30, 2017, the Company had accumulated losses of approximately $7.2 million (out of which $2.9 million is related to stock-based compensation). Based on the projected cash flows and Company’s cash balances as of September 30, 2017, Company’s management is of the opinion that without further fund raising it will not have sufficient resources to enable it to continue advancing its activities including the development, manufacturing and marketing of its products for a period of at least 12next twelve months from the date of issuance of these financial statements. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans include the continued commercialization of the products, continue taking cost reduction steps and securing sufficient financing through the sale of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurances however, that the Company will be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in commercializingembarking on its productsnew activity as detailed herein, it is incurring losses. It cannot determine with reasonable certainty when and securing sufficient financing,if it may need to reduce activities, curtail or cease operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.will have sustainable profits.
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
B. Summary of significant accounting policiesUnaudited Interim Financial Statements
The accounting policies adopted are consistent with those of the previous financial year.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and condensed footnotes have beenits subsidiary, prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S.accounting principles generally accepted accounting principlesin the United States of America (“GAAP”GAAP”), for complete financial statements. and with the instructions to Form 10-Q. In the opinion of management, the financial statements presented include all material adjustments (consisting of normal recurring items) consideredadjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented have been included. Thefinancial condition, results of operations and cash flows for the nine and thefor three months ended September 30, 2017March 31, 2021. However, these results are not necessarily indicative of the results to be expectedfor any other interim period or for the year or for other interim periods or for future years. The consolidated balance sheet as ofended December 31, 2016 is derived from audited2021.
Certain information and footnote disclosures normally included in financial statements as of that date; however, it does not include allin accordance with generally accepted accounting principles have been omitted pursuant to the rules of the informationU.S. Securities and footnotes required by GAAP for complete financial statements.Exchange Commission (“SEC”). These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes includedthereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on May 10, 2017.2020.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of TechCare,Citrine Global and its subsidiary, Novomic.Israeli Subsidiary. All significant intercompany accountsbalances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates include fair value estimates of derivative liabilities and assets. Actual results could differ from those estimates.
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF RESENTATION (cont.)
Fair value
Fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosure,” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
Fair value, as defined by ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: (i) the market approach; (ii) the income approach; and (iii) the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: RECENTLY ISSUEDQuoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
CITRINE GLOBAL, CORP .
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRONOUNCEMENTSPOLICIES AND BASIS OF RESENTATION (cont.)
Fair value (cont.)
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), (ii) segregating those gains or losses included in earnings, and (iii) a description of where those gains or losses included in earning are reported in the statement of operations.
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
Balance as of March 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Trading securities | - | 520,107 | - | 520,107 | ||||||||||||
Total assets | - | 520,107 | - | 520,107 | ||||||||||||
Liabilities: | ||||||||||||||||
Fair value of convertible component in convertible notes | - | - | 368,114 | 368,114 | ||||||||||||
Fair value of forward option | - | - | 94,703 | 94,703 | ||||||||||||
Total liabilities | - | - | 462,817 | 462,817 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF RESENTATION (cont.)
Fair value (cont.)
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
Balance as of December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Trading securities | - | 521,615 | - | 521,615 | ||||||||||||
Short-term loan measured at fair value | - | - | 165,185 | 165,185 | ||||||||||||
Total assets | - | 521,615 | 165,185 | 686,800 | ||||||||||||
Liabilities: | ||||||||||||||||
Fair value of convertible component in convertible notes | - | - | 381,147 | 381,147 | ||||||||||||
Fair Value of forward option | - | - | 71,722 | 71,722 | ||||||||||||
Total liabilities | - | - | 452,869 | 452,869 |
The following table presents the changes in fair value of the level 3 liabilities for the period ended March 31, 2021:
Changes in Fair value | ||||
Assets: | ||||
Outstanding at December 31, 2020 | 165,185 | |||
Repayment of short term loan | (163,726 | ) | ||
Interest and change in fair value of short-term loan measured at fair value | (1,459 | ) | ||
Outstanding at March 31, 2021 | - | |||
Liabilities: | ||||
Outstanding at December 31, 2020 | 452,869 | |||
Changes in fair value | 9,948 | |||
Outstanding at March 31, 2021 | 462,817 |
12 |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF RESENTATION (cont.)
Conversion feature
In March 2016,accordance with ASC 815-15-25, the FASBconversion feature was considered embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within current liabilities in the Company’s balance sheet. The conversion component is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.
The fair value of the conversion feature (hereafter “Convertible Component”) was estimated using the Monte-Carlo simulation model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model were consistent with those utilized in the Company’s Black-Scholes valuation for stock options are detailed below:
March 31,2021 | December 31, 2020 | |||||||
Expected volatility (%) | 149.63 | % | 164.43 | % | ||||
Risk-free interest rate (%) | 0.06 | % | 0.1 | % | ||||
Expected dividend yield | 0.0 | % | 0.0 | % | ||||
Contractual term (years) | 0.71 | 0.95 | ||||||
Conversion price | (* | ) | (* | ) | ||||
Underlying share price (U.S. dollars) | 0.08 | 0.045 | ||||||
Convertible notes amount | 1,275,204 | 1,275,204 | ||||||
Fair value of the conversion feature (U.S. dollars) | 368,114 | 381,147 |
(*) the conversion price is 85% of the share price, during the period of 5 days preceding the conversion date.
The fair value of such shares exchange agreement was estimated using the Black-Scholes option-pricing model and is presented among current liabilities within the Company’s condensed consolidated balance sheet.
The following are the data and assumptions used as of the balance sheet date related to future potential issuance of shares as describe above for potential fall in share price of a party, not exceeding 20%:
Derivative related to Intelicanna’s shares | March 31, 2021 | |||
Common Stock price | 0.83 | |||
Expected volatility | 47.67 | % | ||
Conversion price (U.S. dollars) | 0.64 | |||
Expected term | 0.1 months | |||
Risk free rate | 0.05 | % | ||
Expected dividend yield | 0 | % | ||
Fair value of the derivative (U.S. dollars) | 5,296 |
Derivative related to Citrine Global’s shares | March 31, 2021 | |||
Common Stock price | 0.08 | |||
Expected volatility | 151.44 | % | ||
Conversion price (U.S. dollars) | 0.2 | |||
Expected term | 0.1 months | |||
Risk free rate | 0.05 | % | ||
Expected dividend yield | 0 | % | ||
Fair value of the derivative (U.S. dollars) | (99,999 | ) |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF RESENTATION (cont.)
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU No. 2016-09, which simplifies certain aspects of2020-06 will simplify the accounting for share-based payments, including accounting for income taxes, classification of awards as either equity or liabilities, classification on the statement of cash flows as well as allowing an entity-wide accounting policy election to either estimateconvertible instruments by reducing the number of awardsaccounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are expectednot clearly and closely related to vest or accountthe host contract, that meet the definition of a derivative, and that do not qualify for forfeituresa scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as they occur. Thepaid-in capital. ASU is2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for annual reporting periods (includingpublic companies for fiscal years beginning after December 15, 2023, including interim periods within those annual reporting periods)fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2016 and all amendments of2020, including interim periods within those fiscal years. The Company is currently evaluating the ASUimpact that apply must be adopted in the same period. The adoption by the Company of ASU No. 2016-092020-06 will have on January 1, 2017, didthe Company’s consolidated financial statement presentation or disclosures.
Other new pronouncements issued but not effective as of March 31, 2021 are not expected to have any effecta material impact on the Company’s consolidated financial statements.
NOTE 3: RESTATEMENT3 – STOCK OPTIONS
A. | The following table presents the Company’s stock option activity for employees and directors of the Company for the year ended March 31, 2021: |
Number of Options | Weighted Average Exercise Price | |||||||
Outstanding at December 31, 2020 | 46,762 | 0.0011 | ||||||
Granted | - | - | ||||||
Exercised | - | - | ||||||
Forfeited or expired | - | - | ||||||
Outstanding at March 31, 2021 | 46,762 | 0.0011 | ||||||
Number of options exercisable at March 31, 2021 | 46,762 | 0.0011 |
B. | On March 5, 2020 and November 11, 2020, the Company issued 15,000,000 and 13,222,082 shares of Common Stock, respectively, to its former legal in exchange for its legal consulting services, , which was provided until February 28, 2021. The Company estimated the fair value of the shares issued based on the share price at the grant date at $9,003 thousand. |
The Company restated its September 30, 2016 statementrecorded a share based compensation expense in the amount of operations, comprehensive loss and cash flows1,737 thousands in order to correct the following errors:
1) Reclassification of certain property, plant and equipment items that was previously expensed.2) Measurement of stock-based compensation modification for the Company’s 2015 stock grants.3) The accounting treatment of thereverse merger (including the effect on earnings per share).
Statement of operations and comprehensive loss for the nine months period ended September 30, 2016:
As previously reported | Adjustments | As presented in these financial statements | ||||||||||
U.S. Dollar | ||||||||||||
Research and development expenses | 211,222 | 571,009 | 782,231 | |||||||||
General and administrative expenses | 946,169 | (309,258 | ) | 636,911 | ||||||||
Financial expenses (income), net | (129,675 | ) | 172,739 | 43,064 | ||||||||
Net loss for the period | 1,027,716 | 434,490 | 1,462,206 | |||||||||
Total comprehensive loss | 979,361 | 633,057 | 1,612,418 | |||||||||
Loss per share – Basic and diluted | (0.15 | ) | 0.05 | (0.10 | ) | |||||||
Weighted average number of common stock outstanding – Basic and diluted | 6,853,206 | 8,213,772 | 15,066,978 |
Statement of operations and comprehensive loss for the three months period ended September 30, 2016:March 31, 2020.
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
As previously reported | Adjustments | As presented in these financial statements | ||||||||||
U.S. Dollar | ||||||||||||
Research and development expenses | 64,020 | 239,577 | 303,597 | |||||||||
General and administrative expenses | 287,462 | 257,285 | 544,747 | |||||||||
Financial expenses (income), net | (131,302 | ) | 173,637 | 42,335 | ||||||||
Net loss for the period | 220,180 | 670,499 | 890,679 | |||||||||
Total comprehensive loss | 203,749 | 835,667 | 1,039,416 | |||||||||
Loss per share – Basic and diluted | (0.02 | ) | (0.03 | ) | (0.05 | ) | ||||||
Weighted average number of common stock outstanding – Basic and diluted | 10,570,821 | 6,956,199 | 17,527,020 |
Statements of cash flows for the nine months ended September 30, 2016:
As previously reported | Adjustments | As presented in these financial statements | ||||||||||
U.S. Dollar | ||||||||||||
Net cash used in operating activities | (806,128 | ) | (81,567 | ) | (887,695 | ) | ||||||
Net cash provided by (used in) investing activities | 1,121,540 | (1,181,620 | ) | (60,080 | ) | |||||||
Net cash provided by financing activities | 165,000 | 1,146,462 | 1,311,462 |
NOTE 4: STOCKHOLDERS’ EQUITY4 – EVENTS DURING THE PERIOD
Share capital
During the nine months ended September 30, 2017On June 25, 2020, the Company entered into several agreements, under whichand the Company raised an aggregate amount of $878,250. In October 2017, the CompanyIsraeli Subsidiary entered into an Advance Investment Agreementagreement to grant Intelicanna Ltd. (“Intelicanna”) New Israeli Shekel (“NIS”) 1 million in cash (approximately $290,000) in direct financing for working capital purposes. The financing will bear 6% annual interest, and Intelicanna will make additional payments equal to 6% of its gross revenues from the date the financing was received and until the date Intelicanna’s aggregate gross revenues reach NIS 2 million (approximately $600 million). If the total of the 6% interest plus the additional payments would result in a bridge investmentreturn of less than 12% per year to the Company, the interest would be increased to bring the total return to 12%. Every three months Intelicanna must pay the interest, and after 12 months, it must repay the capital, plus the total of the additional payments due, plus any outstanding interest, and it must pay interest of 2% per month on any late payments, provided, however, that until the foregoing obligations are paid in full, Intelicanna must pay 50% of its gross revenues to the aggregate amountCompany upon receipt. If Intelicanna does not pay all amounts due within 18 months, it shall, at the Company’s option, issue to the Company a number of US$250,000 – See note 10.its shares equal to NIS 1.5 million (approximately $0.45 million ) divided by the lower of (i) volume weighted average price (VWAP) of the three trading days prior to the lapse of the 18 months, and (ii) VWAP of the three trading days prior to the signing of the financing agreement. The financing must be paid by the Company to Intelicanna within 30 days of signing the financing agreement, subject to completion of due diligence to the Company’s satisfaction and to Intelicanna receiving a commercial growing license.
On July 9, 2020, the Company transferred to Intelicanna NIS 500,000 (approximately $145,000).
On March 31, 2021, Intelicanna repaid the full principal of the loan together with 12% interest, which amounted to NIS 46,000 (approximately $14,000).
NOTE 5 – RELATED PARTIES
Three months ended March 31 | ||||||||
2021 | 2020 | |||||||
General and administrative expenses: | ||||||||
Directors compensation and fees to officers | 91,500 | - |
B. | Balances with related parties: |
As of March 31, | ||||||||
2021 | 2020 | |||||||
Accounts payable and accrued expenses | 403,673 | - |
CITRINE GLOBAL, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
C. | Commencing in February 2020, Ora Elharar Soffer, CEO and Chairperson of the Board, | |
NOTE 6 – SUBSEQUENT EVENTS
A. | On April 12, 2021, the parties to the Convertible Note Purchase Agreement (the “CL Agreement”) amended the CL Agreement to (i) change the annual interest on the Notes to nine percent, applicable from January 1, 2021, (ii) ensure that the Company shall repay the loans at the time it consummates an investment in the amount of | |
16 |
| ||
Stock-Based Compensation
Stock based awards are accounted for using the fair value method in accordance with ASC 718, Shared Based Payment. The Company’s primary type of stock based compensation consists of stock options to directors, employees, officers, consultants, and advisors. The Company uses the Black-Scholes option pricing model in valuing options.
During March 2017, the Company granted to certain employees options to purchase 723,027 of the Company’s common stock and to non-employees options to purchase 2,000,952 of the Company’s common stock for an exercise price of $0.0001. Out of all the option grants, 1,298,737 options were granted to related parties.During September 2017, the Company granted to its CEO options to purchase 266,369 of the Company’s common stock for an exercise price of $0.0001 per share.
A summary of the stock option activity for the nine-month period ended September 30, 2017:
Number of Options | Weighted Average Exercise Price | |||||||
U.S Dollar | ||||||||
Options outstanding at January 1, 2017 | 1,666,617 | 0.0001 | ||||||
Granted | 2,723,979 | 0.0001 | ||||||
Options outstanding at June 30, 2017 | 4,390,596 | 0.0001 | ||||||
Granted | 266,369 | 0.0001 | ||||||
Options outstanding at September 30, 2017 | 4,656,965 | 0.0001 |
The options granted during the nine months period ended in September 30, 2017 were fully vested on the grant date and exercisable for 2.5-5 years. The following assumptions were applied in determining the options’ fair value on their grant date:
The Company based the risk-free interest rate on the U.S. Treasury yield curve. The expected term in years represents the period of time that the awards granted are expected to be outstanding. The assumption for dividend yield is zero because the Company has not historically paid dividends nor does it expect to do so in the foreseeable future. The volatility was based on the historical stock volatility of several peer companies, as the Company has limited trading history to use the volatility of its own common stock. Stock-based compensation expense included in the Company’s statements of operations were allocated as follows:
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | |||||||
Restated | ||||||||
Research and development expenses | $ | 364,674 | $ | 142,506 | ||||
General and administrative expenses | 1,802,147 | 299,097 | ||||||
$ | 2,166,821 | $ | 441,603 |
Three months ended September 30, 2017 | Three months ended September 30, 2016 | |||||||
Restated | ||||||||
Research and development expenses | $ | - | $ | 142,506 | ||||
General and administrative expenses | 123,681 | 299,097 | ||||||
$ | 123,681 | $ | 441,603 |
NOTE 5: OEM DISTRIBUTION AGREEMENT
On June 23, 2017, the Company entered into an OEM agreement (the “OEM Agreement”) with a medical device and wellness applications company based in the United States (the “OEM Distributor”), according to which the OEM Distributor will manufacture, distribute and sell the Company’s Novokid head lice treatment products in the United States, Canada, Brazil, Argentina, Costa Rica and Colombia, all on an exclusive basis, pursuant to and in accordance with the terms and conditions set forth in the OEM Agreement, including minimum royalties commitments. The OEM Distributor will be solely responsible for obtaining and maintain the approval from the US Food and Drug Administration (the “FDA”) and shall bear all costs related to such approval.
As part of the OEM Agreement, the OEM Distributor paid a royalty advance of $10,000 and also an amount of $140,000 which is held in an escrow account, until the Company completes certain milestones, as described in the OEM Agreement.
NOTE 5: OEM DISTRIBUTION AGREEMENT(continued)
Also, as part of the OEM Agreement, the Company granted the OEM Distributor an option to purchase up to 9.09% of the Company’s common stock for a total consideration of up to $900,000, exercisable until January 15, 2018. The fair value of the option as of September 30, 2017 amounted to $182,720. The key assumptions used in the options’ valuation was as follows:
NOTE 6: INCOME TAXES
a. Basis of taxation
The Company and its subsidiary are taxed under the domestic tax laws of the jurisdiction of incorporation of each entity, United States and Israel, respectively.
b. Carryforward Tax Losses
As of September 30, 2017 and December 31, 2016, the subsidiary had net operating carry forward tax losses of approximately $1.7 million and $0.9 million, respectively. A full valuation allowance was created against these carry forward tax losses since the realization of any future benefit from these net operating losses cannot be sufficiently assured at September 30, 2017 and December 31, 2016.
c. Corporate tax rates
The corporate tax rate in Israel was 26.5% in 2015 and 25% in 2016. The regular corporate tax rate starting January 1, 2017 is 24% and starting January 1, 2018 will be 23%. The corporate tax rate in the U.S is approximately 35%.
NOTE 7: LOSS PER SHARE
Loss per share is based on the loss that is attributed to the stockholders holding common stock, divided by the weighted average number of common stock in issue during the period.
For purposes of the calculation of the diluted loss per share, the Company adjusts the weighted average number of common stock using the treasury stock method assuming conversion of all of the dilutive potential stock. The potential stock are taken into account only if their effect is dilutive (increases loss per share).
NOTE 8: FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company’s financial instruments, including cash equivalents, current assets, accounts payable and accrued liabilities and notes payables approximate their fair value, due to their short term in nature and their carrying amounts approximates the amounts expected to be received or paid.
A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The Company accounts for option liability as Level 3 since its inputs are unobservable inputs for the liability.
The following table is a reconciliation of the change for the financial liability where fair value measurement is estimated utilizing Level 3 inputs:
2017 | ||||
US dollar | ||||
Fair value as of January 1, | $ | - | ||
Change in fair value recognized in statement of operations | 276,150 | |||
Fair value as of June 30, | 276,150 | |||
Change in fair value recognized in statement of operations | (93,430 | ) | ||
Fair value as of September 30, | $ | 182,720 |
NOTE 9: RELATED PARTY TRANSACTIONS
For the issuance of shares of common stock to the Company’s Chairman of the Board’s affiliated entity, other related parties and option grants to the Company’s directors, refer to note 4.
On February 22, 2017, the Company signed an amendment to the original service agreement with Zvi Yemini, the Company’s chairman of the Board, through his affiliated entity, YMY. According to the amendment, Mr.Yemini’s monthly payment was increased to 45,000 NIS (approximately $12 thousand) starting February 2017.
On October 17, 2017, the Company entered into an Advance Investment Agreement with YMY and with Traistman Radziejewski Fundacja Ltd., a company affiliated to Oren Traistman, a member of the Board. For further details, please refer to note 10 below.
NOTE 10: SUBSEQUENT EVENTS
On October 17, 2017, the Company entered into an Advance Investment Agreement (the “Advance Investment Agreement”) with YMY and Traistman Radziejewski Fundacja Ltd. Pursuant to the Advance Investment Agreement, YMY and Traistman Radziejewski Fundacja Ltd. provided the Company with a bridge investment in the aggregate amount of US$250,000 (the “Investment Amount”). The Investment Amount will be immediately payable upon the consummation of an Asset Purchase Agreement with Natur (the “Asset Purchase Agreement”, see note 1 above), provided the consummation of which occurs prior to or on December 31, 2017 (the “Trigger Date”) or upon other insolvency events of the Company, as described in the agreement. In the event that the Company has not consummated the Asset Purchase Agreement prior to or on the Trigger Date, then the entire then outstanding Investment Amount will be automatically converted into shares of common stock of the Company, par value $0.0001 per share (the “Shares”) on the first business day following the Trigger Date, at a price per share equal to 70% of the volume weighted average price (as defined in the Advance Investment Agreement) of the Shares as of such date (the “PPS”). The Investment amount will also be converted into Shares at the PPS upon a Deemed Liquidation Event (as defined in the Advance Investment Agreement).
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTSForward-looking Statements
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number ofQuarterly Report on Form 10-Q contains certain forward-looking statements that reflect our current views with respect to future events and financial performance. Certain statements that the Company may make from time to time, including all statements contained in this Form 10-Q that are not statements of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws, and is subject to the safe harbor provisions set forth in Section 27A of the Securitiessafe-harbor created by such Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-lookinglaws. In some cases, you can identify forward-looking statements may be identified by wordsterminology such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,“may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other variations thereon or comparable terminology. The statements herein and their implications are merely predictions and therefore inherently subject to known and unknown risks, uncertainties, assumptions and other wordsfactors that may cause actual results, performance levels of similar meaning used in conjunction with, among other things, discussions of future operations, financial performance, product development and new product launches, market position and expenditures. The Company assumesactivity, or our achievements, or industry results to be materially different from those contemplated by the forward-looking statements. Except as required by law, we undertake no obligation to updaterelease publicly the result of any forward-looking statements. Additional information concerning factors which could cause differences betweenrevision to these forward-looking statements and future actual resultsthat may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is discusseddescribed under the heading “Risk Factors” in the Company’sPart I, Item 1A, of our Annual reportReport on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission, or the SEC, on April 15, 2021, and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the nine months ended, as filed with the SEC on May 10, 2017. You should not place undue certainty on these forward-looking statements. These forward-looking statementsNovember 16, 2020. Readers are subjectalso urged to certain riskscarefully review and uncertaintiesconsider the various disclosures we have made in that could cause actual results to differ materially fromreport. As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “Citrine” mean Citrine Global, Corp. and our predictions.wholly-owned subsidiary CTGL -Citrine Global Israel Ltd. unless otherwise indicated or as otherwise required by the context.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our historical results of operations during the periods presented and our financial condition for the periods ended September 30, 2017 and 2016. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements for the years ended December 31, 2016 and 2015.
Overview and Recent Developments
Our business activity is comprised of developing Israeli technologies and solutions and bringing them to global markets. We are a technology company engagedbelieve in the design, development and commercialization of a delivery platform utilizing proprietary vaporization various compounds to enable a wide variety of health, wellness, food-tech, botanicals, and beauty treatments (the “Platform”medical cannabis industries that demonstrate high growth potential and focus on these markets.
Our headquarters, directors, and executive officers are all based in Israel, where we operate via our wholly-owned subsidiary, CTGL - Citrine Global Israel Ltd. (“Citrine Global Israel”).
We anticipate to commence generating revenues fromhave developed a unique platform of operational innovation centers (each, an “Operational Innovation Center”) that create eco-systems for the sale of Novokid, our head lice treatment device, duringhealth, wellness, botanicals, and medical cannabis industries. Our first Operational Innovation Center will be the fourth quarter of 2017, following its receipt of regulatory approval from the CECannovation Center Israel Ltd. (the European Union)“Cannovation Center Israel”), obtainedfocusing on Israeli health, wellness, botanicals, and medical cannabis industries, supported in part by the Company during the third quarter of 2017, which now permits us to commence salesIsraeli government grants and marketing activities in Europe.contributions.
Before we enter the U.S. market, we will need to secure approval from the FDA. Pursuant to our OEM Agreement signed in June 2017We have an experienced team and a network of partners that include leading experts with a proven track record in technology, high-tech, biotech, investment, entrepreneurship, real estate, finance, and strategic business development in Israel and worldwide. We plan to operate worldwide through domestic subsidiaries, local teams, partners, and industry experts in each area.
Our vision is to become a global leader in developing wellness and pharma technologies and solutions that improve people’s health and quality of life worldwide.
We created a five-element approach of multi-strategy solutions to realize our vision:
1. | The First Element - Focus on the Israeli Technology Market: Israel, the Startup Nation, is uniquely positioned to be a leading source of technology innovation for global markets. Israel is considered a leader in many high-tech and biotech industries and has a vast and innovative life sciences sector and a cutting-edge medical technology industry. The Israeli technology sector is backed by the Israeli Government, which views technology and innovation as important growth engines for the Israeli economy. |
2. | The Second Element - Operational Innovation Center Platform for the health, wellness, botanicals and medical cannabis industries: We have developed a unique platform for Operational Innovation Centers to create ecosystems that promote operational scale-up and business growth for the high-growth health, wellness, botanicals, and medical cannabis industries. Our first Operational Innovation Center will be built by Cannovation Center Israel, which is 60%-owned by Citrine Global Israel and is backed by Israeli government grants and other benefits. Cannovation Center Israel will focus on building an eco-system for Israeli health, wellness, botanicals & medical cannabis industries. Cannovation Center Israel will include laboratories for botanicals and cannabis research, pharmacological research, product development, preclinical and clinical trials, certified factories for cannabis, health and wellness products, storage, packaging, distribution, import, export, consultancy services, strategy and business development, real estate, asset management solutions and more. |
3. | The Third Element - Focusing on the health, wellness, botanicals and medical cannabis industries: We believe in the health, wellness, botanicals, and medical cannabis industries which demonstrate high growth potential, and we are primarily focused on these industries. |
4. | The Fourth Element - Acquiring companies and developing technological solutions, such as cannabinoid-based pharmaceutical products, and a unique line of products under the Cannovation brand in the fields of botanicals, medical cannabis, cosmetics, and beverages product lines. We are in the process of launching a new line of products named “Green” and, subject to relevant regulations and legal restrictions, intend to start selling the products in Israel online as well as through pharmacies and marketing networks. We also plan to expand sales to Europe and other markets through partners and distribution networks in order to bring new products and new technologies to market, that we believe will leverage our value and create intellectual property. |
5. | The Fifth Element - Creating a Global Network of Offices, Subsidiaries, and Operational Innovation Centers: Our global growth strategy is to create an international network that operates through subsidiary companies, local teams, partners, and Cannovation Operational Innovation Centers. |
On December 30, 2020, the Ministry of the Economy of the Israeli government approved the grant of 10,000 square meters of industrial land in Yeruham, Israel for Cannovation Center Israel to build the Cannovation Center, that includes factories, laboratories, logistics and a distribution center for the medical devicecannabis, CBD, hemp and wellness application company based inbotanicals industries. We own 60% of the United States (the “OEM Distributor”), the OEM Distributor will be solely responsible for obtaining and maintain the FDA approval and shall bear all costs related to such approval.share capital of Cannovation Center Israel, through Citrine Global Israel.
We are a companyin advanced negotiations with limited operations and no revenues from our business operations.the Yeruham Local Council with respect to the Cannovation Center Israel project. There is substantial doubtalready an architectural conceptual plan for the building and for the interior design and we have pricing for the project, including various suppliers. The Cannovation Center Israel’s new chief executive officer aims to establish the Cannovation Center Israel, obtain the required licenses, select suppliers, partners and other activities to realize our strategy.
On April 5, 2021, we announced that Intelicanna Ltd. (“Intelicanna”), a publicly-traded Israeli medical cannabis company listed on the Tel-Aviv Stock Exchange, has repaid in full the loan we can continueprovided to Intelicanna in the amount of NIS 500,000 (the “Loan”) as well as 12% interest. Previously, we and Citrine Global Israel had entered into several strategic agreements with Intelicanna, which included a loan agreement to provide Intelicanna with the Loan.
On April 29, 2021, our board of directors (the “Board”) appointed David Kretzmer as a going concern formember of the next twelve months withoutBoard and expanded the successnumber of our new business operations. We project that we will needBoard members to raise approximately $1,200,000 duringfive, with such expansion of the next 12 months in order to successfully implement our business planBoard and to become profitable,appointment of which there can be no assurance. Failure to obtain this necessary capital at acceptable terms, if at all, when needed, may force us to delay, limit, or terminate our product development efforts and secure regulatory approvals and would adversely impact our planned research and development efforts in connection with the Company’s future products, which may make it more difficult for us to attain profitability.
Recent Developments and Plans
Our current and future products are all based on our Platform, which was developed over a period of 7 years. During the past 18 months, we have achieved the following:
During the next 12-18 months, we plan to focus our efforts on the following:Mr. Kretzmer taking effect immediately.
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We may be required to obtain additional regulatory approvals for our head lice treatment platform and any future products. If unable to receive regulatory approval or commercialize our product candidates, our business will be adversely affected. CE approvalOn May 5, 2021, Cannovation Center Israel, which is required for the marketing, distributing and sale of our products in the EU, whereas FDA approval is required for such marketing, distributing and sale in the United States. In the event that our products are to be sold in certain territories requiring additional regulatory approvals, such approvals will need to be obtainedpartly-owned (60%) by us or by our distributors.
On August 23, 2017, we entered into an MOU with Natur, pursuant to which we will acquire certain assets, operations and activities of Natur, in consideration for which we will issue a number of shares of common stock, par value $0.0001 per share representing fifty percent (50%) of our issued and outstanding common stock, on a fully diluted bases. The parties have agreed to use commercially reasonable efforts to negotiate and execute a definitive agreement within thirty (30) days of the execution of the MOU and subsequent closing of the aforesaid transactions. In connection with the transaction, the parties shall enter into a separate stockholders’ agreement pursuant to which our Board, following the Closing, shall be comprised of six (6) directors, three (3) of whom shall be nominated for election by the controlling stockholders of Natur and three (3) of whom shall be nominated for election by our current controlling stockholders. The MOU may be terminated by either party in the event definitive agreements are not executed by the parties within eighty (80) days of the execution of the MOU.
Citrine Global Israel, appointed Hagai Hillman as its new chief executive officer.
Our Treatment Solution
Novokid - Natural, Plant-based and Effective Lice Treatment
Parents and children exposed to head lice are now forced to use standard Over the Counter treatments that are toxic, often ineffective, time consuming and expensive. The global market for head lice treatments is estimated at $1.8 billion per annum whereas 6-12 million children get head lice each year in the US alone causing indirect damages estimated at $4-8 billion per annum. According to the Journal of Medical Entomology, 98% of lice have developed resistance to existing treatments in the US and they have now referred to as “super-lice”. Most current treatments contain pesticides, alcohol or silicone, which are all associated with a wide variety of hazardous side effects. Novokid is a non-pesticide, natural, plant-based and eco-friendly solution that eliminates lice and super lice by a 10 minute dry treatment. This compares with current treatments that required 20-40 minutes of shampooing and daily combing. Our treatment is fast, dry, clean, and easily administered at home or on the go. Novokid can also be used as a maintenance and preventative treatment if used regularly.
Shine - Natural Haircare Rejuvenation
Shine uses cold vaporization and a proprietary formulation to clean, treat and improve the appearance of the hair and scalp. In addition to removing the residue of products, the treatments will balance the hair’s pH levels, add body and shine, define curls, and strengthen and protect hair from further damage. Like our solution for lice, users simply put a Shine capsule in the compressor, place the attached cap on their head and sit for a 10-minute treatment. There is no need to rinse or shampoo following the treatment.
The global hair care market is estimated to be in excess of $80 billion per annum, and we are looking to establish a presence in the hair salon and home treatment niche. To that end, we are in the process of expanding the Shine treatment product line to include formulations for the needs of specific hair types, such as dry, curly, colored, and over-processed hair.
Business model
While the vaporizer for both Novokid and Shine is designated to be a one-time purchase, the head cap, and especially the capsules, will be sold based on the razor/razor-blade business model and based on our estimates, which we believe are both reasonable and conservative, our target customers for Novokid and Shine are expected to purchase between 12-16 capsules, on average, per year. Therefore, we estimate that the majority of the revenues that the Company will generate in the future will be based on capsules sales for both Novokid and Shine products.
The Company plans to focus its initial sales and marketing efforts on two of the largest markets in the world - the European Union and the United States markets, starting in the European Union where CE approval was obtained during the third quarter of 2017.
In order to achieve its intended global footprint and market presence, the Company’s primary distribution method will be based on the business-to-business OEM and distribution agreements, as oppose to direct sales to end-customers. We believe that these models will reduce our sales and marketing costs to a minimum while starting to generate revenues to support our research and development efforts for utilizing our technological platform to expand our product line.
Intellectual Property
Due to the importance of patents, the Company has devoted significant efforts and resources and will continue to invest resources in strengthening its patent portfolio. Below is the list of patents registered by the Company to date:
The Company plans to expand existing patents related to pushing air using its vaporizer and new substances which are now being researched and documented, and more subjects that will be developed during research.
Research and Development
We spent approximately $1. 5 million on research and development (excluding stock based compensation expenses) during the past two years. During this period, we completed the product development of both Novokid and Shine, which included finalization of commercial design of compressor, capsules and head cap and optimizing the products efficiency.
The Company plans to build upon the research and development achievements it had with the completion of the head lice treatment product as the basis to expand its variety of treatments and solutions, which will also be based on the developed platform and the knowledge the Company gained principally during the past two years.
Results of Operations during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016
During the nine months ended September 30, 2017 and 2016, we generated no revenues.
Our research and development expenses during the nine months ended September 30, 2017 were $872,874 (compared to $782,231 during the same period in the prior year), comprised of $508,200 of ongoing research and development expenses (compared to $639,725 during the same period in the prior year) and additional sum of $364,674 (compared to $142,506 during the same period in the prior year) in stock based compensation to the Company’s research and development employees and service providers.
Our general and administrative expenses during the nine months ended September 30, 2017, were $2,441,860 (compared to $636,911 during the same period in the prior year) comprised of $639,713 of payroll and service providers’ consultancy (compared to $337,814 during the same period in the prior year) and an additional sum of $1,802,147 in stock based compensation to our management, consultants and service providers (compared to $299,097 during the same period in the prior year).
During the nine months ended September 30, 2017, we incurred a net loss of $3,477,807 (compared to $1,462,206 during the same period in the prior year). Excluding a sum of $2,166,821 in stock based compensation (compared to $441,603 during the same period in the prior year) we incurred a net loss of $1,310,985 (compared to a net loss of $1,020,603 in the same period in the prior year) principally for the reasons noted above.
Results of Operations during the three months ended September 30, 2017March 31, 2021 as compared to the three months ended September 30, 2016March 31, 2020
During the three months ended September 30, 2017March 31, 2021, the Company generated $0 in revenues, compared to $11 thousand in the three months ended March 31, 2020. The decrease is mainly attributable to our selling 90% of the shares we held in Novomic Ltd. (“Novomic”) and 2016, we generated no revenues.focusing on our new strategy and business activity, and, therefore, ceasing to consolidate the financial statements of Novomic.
OurThe Company’s research and development expenses during the three months ended September 30, 2017,March 31, 2021 were $131,765$0 compared to $303,597 (comprised of ongoing research and development expenses of $161,091 and additional sum of $142,506 in stock based compensation)$18 thousand during the same period in the prior year.three months ended March 31, 2020. The decrease is mainly dueattributable to completionour selling 90% of researchthe shares we held in Novomic and development activities relatedfocusing on our new business activity, and therefore ceasing to Novokid, offset by ongoing research and development expenses related to Shine.consolidate the financial statements of Novomic.
During the nine months and three months ended September 30, 2017, we recorded $182,720 fair value option expenses and $93,430 fair value option income, respectively, related to the OEM Agreement with the OEM Distributor in June 2017 mainly due to the change in stock price.
OurThe Company’s marketing, general and administrative expenses during the three months ended September 30, 2017,March 31, 2021, were $361,342$1,975 thousand compared to $544,747$668 thousand during the same periodthree months ended March 31, 2020. The increase in our marketing, general and administrative expenses is mainly attributable to the increase in our share-based compensation expenses and legal fees paid in connection with the TechCare Transaction, which was partially offset by a decrease in marketing expenses and salary and related expenses as a result of the sale of 90% of the shares we held in Novomic resulting in our ceasing to consolidate the financial statements of Novomic.
During the three months ended March 31, 2021, the Company incurred financial expenses of $126 thousand, as compared to financial income of $3 thousand during the three months ended March 31, 2020. The reason for the increase in financial expense was due to $23 thousand of fair value adjustment of liability in connection with stock exchange agreement with Intelicanna, $107 thousand as a result of a change in convertible component in convertible notes, as well as exchange rate differences resulting from variations in the prior year. The decrease is mainly dueNew Israel Shekel exchange rate to stock based compensation expenses.the U.S. Dollar.
WeAs a result of the above, the Company incurred a net loss of $394,372approximately $2,100 thousand during the three months ended September 30, 2017,March 31, 2021 as compared to a net loss of $890,679 inapproximately $689 thousand during the same period in the prior year due principally for the reasons noted above.three months ended March 31, 2020.
Liquidity and Capital Resources
OurThe Company’s balance sheet as of September 30, 2017,March 31, 2021 reflects total assets of $367,120approximately $1,277 thousand consisting mainly of cash and cash equivalents in the amount of $84,282, other receivablesapproximately $289 thousand, investments valued under the measurement alternative in the amount of $160,620approximately $450 thousand and property and equipment net,trading securities in the amount of $99,744. Asapproximately $520 thousand. The Company’s balance sheet as of December 31, 2016, the balance sheet2020, reflects total assets of $410,609approximately $3,104 thousand consisting mainly of cash and cash equivalents in the amount of $275,041, other receivablesapproximately $206 thousand, prepaid share based payments to a service provider in the amount of $23,069approximately $1,737 thousand, investments valued under the measurement alternative in the amount of approximately $450 thousand, trading securities in the amount of approximately $522 thousand and property and equipment net,a short-term loan measured at fair value in the amount of $100,841.Theapproximately $165 thousand. The decrease is mainly related mainly to athe decrease of our cash balances by $190,759 offset by an increase in other receivables by $137,551.prepaid share-based compensation expense which was recognized in the current period because the related services were provided.
As of September 30, 2017, weMarch 31, 2021, the Company had total current liabilities of $407,692approximately $1,975 thousand consisting mainly of accounts payable and accrued expenses of $137,780, notes payable of $87,192 and option liability of $182,720. As of December 31, 2016, we had total current liabilities of $283,988 consisting of $203,692approximately $632 thousand in accounts payable and accrued expenses and $80,026outstanding convertible notes in notes payable. The increase is mainly due to option liability recorded as partthe amount of the OEM distribution agreement offset by payment of certain accounts payable and accrued expenses balances.
approximately $1,248 thousand. As of September 30, 2017, we had negative working capital of $162,790 compared to positive working capital of $14,122 at December 31, 2016. The working capital has been sufficient to sustain our operations to date, although there is substantial doubt about our ability to continue as going concern. Our2020, the Company had total current liabilities as of September 30, 2017 were $428,876 compared to $296,651 at December 31, 2016.
During the nine months ended September 30, 2017, we used $1,065,582approximately $1,702 thousand consisting mainly of cash in our operating activities. This resulted mainly from an overall net loss of $3,477,807, offset by stock-based compensation expenses of $2,166,821, fair value option expenses of $182,720 and a decreaseapproximately $476 thousand in accounts payable and accrued expenses and outstanding convertible notes in the amount of $60,512.approximately $1,154 thousand.
As of March 31, 2021, the Company had negative working capital in the amount of approximately $1,152 thousand, compared to positive working capital in the amount of approximately $947 thousand at December 31, 2020.
The Company’s total liabilities as of March 31, 2021 and as of December 31, 2020 were approximately $1,975 thousand and $1,702 thousand respectively.
During the ninethree months ended September 30, 2016, weMarch 31, 2021, the Company used $887,695approximately $81 thousand in ourits operating activities. This resulted primarily from operating expenses of approximately $1,975 thousand, net of non-cash items mainly from a net losscomprised of $1,462,206, a decrease in other receivables of $63,194, an increase in accounts payablestock-based compensation of approximately $1,737 thousand, interest accrued on convertible loan of approximately $95 and accrued expensesincrease in account payables of $60,481, offset by stock based compensation expenses of $441,603.
During the nine months ended September 30, 2017, we used $11,821 in our investing activities as compared to $60,080 in the same period in the prior year. The decrease was mainly due to a decrease in the purchase of fixed assets.$156.
During the ninethree months ended September 30, 2017, ourMarch 31, 2020, the Company used approximately $218 thousand in its operating activities. This resulted from operating expenses of approximately $685 thousand, net of non-cash items comprised mainly of an increase in stock-based compensation of approximately $479 thousand.
During the three months ended March 31, 2021, the Company’s cash provided by investing activities amounted to $164 thousand, consisting of repayments of short-term loan.
During the three months ended March 31, 2020, the Company’s net cash provided by financing activities provided us with $878,250 through theof approximately $226 thousand comprised of $154 thousand proceeds from related party loans and $72 thousand from proceeds from issuance of common stock, net.
On April 13, 2021, the Citrine S A L Group has furnished the Company with an irrevocable letter of obligation to support the Company until June 30, 2022 financially, which will allow the Company to be operational as compared to $1,311,462 inplanned and budgeted through this period (the “Irrevocable Letter”).
Based on the same period inCompany’s current cash balances and the prior year, out of which $166,532 were in proceedsIrrevocable Letter, the Company believes that it has sufficient funds for its plans for the next twelve months from the issuance of common stock and $1,144,930 were acquired through the reverse merger with Novomic.
While management believesthese financial statements. As the Company is embarking on its activities as detailed herein, it is incurring losses. It cannot determine with reasonable certainty when and if it will be successful in its current and planned operating activities, there can be no assurance that the Company will be successful in the achievement of sales of its products that will generate sufficient revenues to earn a profit and sustain the operations of the Company.
Our ability to create sufficient working capital to sustain us over the next twelve-month period and beyond, is dependent on our ability to raise additional funds through the issuance of equity or debt instrument.
There can be no assurance that sufficient capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.sustainable profits.
Going Concern ConsiderationOff-Balance Sheet Arrangements
As result of the above, there is substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures with respect to this matter, but no accounting adjustments that relate to this matter.
Off-Balance Sheet Arrangements
We haveThe Company has no off-balance sheet arrangements.
Critical Accounting Policies
There was no change to our critical accounting policies since the year ended December 31, 2016.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controlsDisclosure Controls and procedures.Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer (who is the Company’s principal executive officer)officer and the Company’s Chief Financial Officer, (who is the Company’s principal financial officer)officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and theobjectives. The Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the Company’s evaluation of ourthe effectiveness of its disclosure controls and procedures as of September 30, 2017, our Chief Executive OfficerMarch 31, 2021, the Company’s principal executive officer and Chief Financial Officerthe Company’s principal financial officer concluded that as of such date, the Company’s disclosure controls and procedures were ineffective due to material weaknesses identified in the Company’s internal control over financial reporting as described below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, our management, with the participation of the Company’s principal executive officer and principal financial officer has conducted an assessment, including testing, using the criteria in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, the Company’s management concluded its internal control over financial reporting was not effective and required improvement as of September 30, 2017. The ineffectiveness of the Company’s internal control over financial reporting was due to the following material weaknesses:
(i) Inadequate segregation of duties consistent with control objectives; and
(ii) Ineffective controls over period-end financial disclosure and reporting processes.
Our management believes the material weaknesses identified above led to the restatement of the March 31, 2016 and September 30, 2016 interim financial statements and the December 31, 2015 annual financial statements. We are currently still reviewing our internal controls and procedures related to these material weaknesses and still expect to implement changes in the current fiscal year as resources allow, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.
Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.effective.
Changes in Internal Control over Financial Reporting
During the quarterthree months ended September 30, 2017,March 31, 2021, there were no changes in ourthe Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
We know of no material, active or pending legal proceedings against our Company, nor of any proceedings that a governmental authority is contemplating against us. We know of no material proceedings to which any of our directors, officers, affiliates, owner of record or beneficially of more than 5 percent of our voting securities or security holders is an adverse party or has a material interest adverse to our interest.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEED
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
Not applicable.On May 14, 2021, our board of directors approved a monthly compensation fee in the amount of $7,000, effective retroactively to March 1, 2021, to Mr. Kretzmer for his services as a director and as a consultant.
(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.
Exhibit No. | Description | |
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section | ||
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section | ||
101.1* | The following materials from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 formatted in XBRL (eXtensible Business Reporting Language): (i) the Interim Condensed Consolidated Balance Sheets, (ii) the Interim Condensed Consolidated Statements of Operations, (iii) the Interim Condensed Consolidated Statements of Comprehensive Loss, (iv) the Interim Condensed Statements of Changes in Equity, (v) the Interim Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Interim Condensed Consolidated Financial Statements, tagged as blocks of text and in detail. |
* Filed herewith
** Furnished herewith
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.
By: | /s/ | |
Chairperson of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: | May 17, 2021 | |
By: | /s/ | |
Chief Financial Officer and Director | ||
(Principal Financial and Principal Accounting Officer) | ||
Date: | May 17, 2021 |
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