SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
Commission file number 0-54862
(Exact Name Of Registrant As Specified In Its Charter)
(State of Incorporation)
(I.R.S. Employer Identification No.)
|20 West 64th Street, Suite 39G, New York, NY||10023|
|(Address of Principal Executive Offices)||(ZIP Code)|
Registrant’s Telephone Number, Including Area Code: +(972) 54 427777
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company.
|Large accelerated filer [ ]||Accelerated filer [ ]||Non-Accelerated filer [ ]||Smaller reporting company [X]|
On November 13, 2020, the Registrant had 34,546,060 shares of common stock issued and outstanding.
TABLE OF CONTENTS
|PART I - FINANCIAL INFORMATION|
|ITEM 1.||FINANCIAL STATEMENTS.||3|
|Statements of Operations||4|
|Statements of Changes in Stockholders’ Equity (Deficit)||5|
|Statements of Cash Flows||6|
|Notes to Unaudited Financial Statements||7|
|ITEM 2.||MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.||12|
|ITEM 3.||QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.||14|
|ITEM 4.||CONTROLS AND PROCEDURES.||15|
|PART II - OTHER INFORMATION|
|ITEM 1.||LEGAL PROCEEDINGS.||15|
|ITEM 1A.||RISK FACTORS.||15|
|ITEM 2.||UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.||15|
|ITEM 3.||DEFAULT UPON SENIOR SECURITIES.||15|
|ITEM 4.||MINE SAFETY DISCLOSURE.||15|
|ITEM 5.||OTHER INFORMATION.||15|
At September 30, 2020 (Unaudited) and December 31, 2019
|September 30, 2020||December 31, 2019|
|Total current assets||204,365||18,278|
|Liabilities and Stockholders’ Equity (Deficit)|
|Accounts payable - trade||$||-||$||4,050|
|Accrued interest, related party||1,564||1,564|
|Accrued salary, related party||251,527||105,862|
|Loan from shareholder, related party||165,905||165,905|
|Total current liabilities||418,996||277,381|
|Stockholders’ equity (deficit):|
|Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding||-||-|
|Common stock, $0.00001 par value; 500,000,000 shares authorized; and 34,546,060 issued and outstanding at September 30, 2020 and December 31, 2019||345||345|
|Additional paid in capital||33,801,343||33,788,889|
|Total stockholders’ equity (deficit)||(214,631||)||(259,103||)|
|Total Liabilities and Stockholders’ Equity (Deficit)||$||204,365||$||18,278|
See Notes to Unaudited Interim Financial Statements.
Statements of Operations
For the Three- and Nine-Month Periods Ended September 30, 2020 and 2019
|For the three||For the three||For the nine||For the nine|
|months ended||months ended||months ended||months ended|
|September 30, 2020||September 30, 2019||September 30, 2020||September 30, 2019|
|General and administrative||107,681||71,792||300,217||343,500|
|Research and development||61,499||37,772||154,851||110,592|
|(Loss) from operations||(169,180||)||(109,564||)||(455,068||)||(454,092||)|
|Other income (expenses):|
|Total other expenses||(3,807||)||(982||)||(39,486||)||-||)|
|Basic and diluted per share amount:|
|Basic and diluted net loss||$||(0.07||)||$||(0.00||)||$||(0.01||)||$||(0.01||)|
|Weighted average shares outstanding (basic and diluted)||34,546,060||34,546,243||34,546,060||34,546,243|
See Notes to Unaudited Interim Financial Statements.
Statements of Changes in Stockholders’ Equity (Deficit)
For the Nine-Month Period ended September 30, 2020 and 2019
|Balance at December 31, 2018||34,546,060||$||345||$||33,781,881||$||21,000||$||(33,632,525||)||$||170,701|
|Balance at September 30, 2019||34,546,060||$||345||$||33,784,734||$||21,000||$||(34,089,470||)||$||(283,391||)|
|Balance at December 31, 2019||34,546,060||345||33,788,889||21,000||(34,069,337||)||(259,103||)|
|Balance at September 30, 2020||34,546,060||$||345||$||33,801,343||$||468,600||$||(34,484,919||)||$||(214,631||)|
See Notes to Unaudited Interim Financial Statements.
Statements of Cash Flows
For the Nine Months Ended September 30, 2020 and 2019
|For the nine||For the nine|
|months ended||months ended|
|September 30, 2020||September 30, 2019|
|Cash flows from operating activities:|
|Adjustments to reconcile net loss to cash used in operating activities:|
|Changes in assets and liabilities:|
|(Increase) decrease in prepaid expenses||-||4,882|
|Increase (decrease) in accounts payable||(4,050||)||-|
|Increase (decrease) in accrued salary, related party||145,665||67,204|
|Cash used in operating activities||(261,513||)||(382,006||)|
|Cash flow from financing activities:|
|Related party borrowings||-||28,169|
|Proceeds from stock payable||447,600||-|
|Cash provided by financing activities||447,600||28,169|
|Change in cash||186,087||(353,837|
|Cash - beginning of period||18,278||390,495|
|Cash - end of period||$||204,365||$||36,658|
|Supplemental Disclosures of Cash Flow Information:|
|Cash paid during the period for:|
See Notes to Unaudited Interim Financial Statements.
Notes to Unaudited Financial Statements
September 30, 2020
1. The Company and Significant Accounting Policies
E-Qure Corp. (“EQURE” or the “Company”) is a Delaware corporation with offices in Israel. EQURE owns IP of innovate technology of wound healing device (BST).
Basis of Presentation:
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception.
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
Cash and Cash Equivalent s
For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents as of September 30, 2020 and December 31, 2019.
Property and Equipment
New property and equipment are recorded at cost. Property and equipment included in the bankruptcy proceedings and transferred to the Trustee had been valued at liquidation value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.
Valuation of Long-Lived Assets
We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
Stock Based Compensation
Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company’s common stock, the estimated volatility of the Company’s common stock, the exercise price of the warrants and the risk free interest rate.
Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock
We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.
Fair Value of Financial Instruments
FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At September 30, 2020 and December 31, 2019, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.
Fair Value Measurements
The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Other inputs that are observable, directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.
Level 3: Unobservable inputs are used when little or no market data is available, which requires the Company to develop its own assumptions about how market participants would value the assets or liabilities. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques in its assessment that maximize the use of observable inputs and minimize the use of unobservable inputs. The following table presents the Company’s financial assets and liabilities that are carried at fair value, classified according to the three categories described above:
Fair Value Measurements at September 30, 2020
Quoted Prices in Active Markets for Identical Assets
|Total||(Level 1)||(Level 2)||(Level 3)|
|Total assets and liabilities at fair value||$||-||$||-||$||-||$||-|
Fair Value Measurements at December 31, 2019
Quoted Prices in Active Markets for Identical Assets
|Total||(Level 1)||(Level 2)||(Level 3)|
|Total assets and liabilities at fair value||$||-||$||-||$||-||$||-|
When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the fiscal periods ended September 30, 2020 and December 31, 2019, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.
Earnings per Common Share
We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.
Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset. Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.
ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.
Uncertain Tax Positions
The Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN No. 48”) which was effective for the Company on January 1, 2007. FIN No. 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements.
Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2009. We are not under examination by any jurisdiction for any tax year. At September 30, 2020, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FIN 48.
Recent Accounting Pronouncements
In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, lease with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. During the year ended December 31, 2019, the Company assessed the impact this guidance had on its financial statements and concluded that at present ASU No. 2018-10 has no impact on its financial statements due to not having any commitment to stay in our property longer than a year.
2. Stockholders’ Equity
We are currently authorized to issue up to 500,000,000 shares of $0.00001 par value common stock.
Issuances of Common Stock During the Period ended September 30, 2020:
During the nine-month period ended September 30, 2020, the Company received proceeds of $447,600 from shares of common stock to be issued at $0.10 per share.
Issuances of Common Stock During the Period ended September 30, 2019:
The Company did not issue any Common Stock during the three and nine months ended September 30, 2019.
We are currently authorized to issue up to 25,000,000 shares of $0.00001 par value preferred stock. There are no preferred shares outstanding as of September 30, 2020 and December 31, 2019.
On January 1, 2015, the Company authorized the adoption of the 2015 Employee Incentive Plan.
Stock Options and Warrants Granted
Following is a table summarizing warrants outstanding and exercisable along with exercise price and range of remaining term.
|Name||Description||Grant Date of|
|Stock Price on|
|Exercise Price of Options/Warrants||Terms of|
|Warrants Class A||Shares for cash||09/05/2018||4,777,734||$||0.08||$||0.50||2 years|
|Warrants Class B||Shares for cash||09/05/2018||4,777,734||$||0.08||$||0.50||3 years|
|Warrants Class A||Debt conversion||07/01/2018||1,376,515||$||0.07||$||0.50||2 years|
|Warrants Class B||Debt conversion||07/01/2018||1,376,515||$||0.07||$||1.25||3 years|
|Warrants Class C||Debt conversion||07/01/2018||2,750,000||$||0.07||$||1.00||10 years|
3. Notes Payable
During the period ended September 30, 2020 and the year ended December 31, 2019, the Company received advances on outstanding notes for a total of $0 and $128,169, respectively, from a related party. As of September 30, 2020 and December 31, 2019, the Company had outstanding loans due to related parties of $165,905. During the period ended September 30, 2020 and December 31, 2019, the Company incurred imputed interest charges of $12,454 and $2,853, respectively.
|September 30, 2020||December 31, 2019|
|Itsik Ben Yesha, CTO||$||100,000||$||137,736|
|Investor, related party||$||65,905||$||28,169|
All notes payable amounts are due on demand.
4. Related Party Transactions not Disclosed Elsewhere
During the period ended September 30, 2020 year ended December 31, 2019, the Company received advances on outstanding notes for a total of $0 and $128,169, respectively, from a related party. As of September 30, 2020 and December 31, 2019, the Company had outstanding loans due to related parties of $165,905. During the period ended September 30, 2020 and December 31, 2019, the Company incurred imputed interest charges of $12,454 and $2,853, respectively. As of September 30, 2020, Itsik Ben Yesha with $100,000 as related party.
During the nine months ended September 30, 2020, the Company received total proceeds from stock subscriptions of $447,600 or $0.10 per share.
As of September 30, 2020 and December 31, 2019, we had accrued salaries of $251,527 and $105,862, respectively, due to three of our officers.
As of September 30, 2020 and December 31, 2019, we had accrued interest of $1,564 due to Mr. Weissberg, who is the Company’s Chairman of the audit committee. The principal underlying the note was converted in 2014.
5. Other Income
During the three and nine months-period ended September 30, 2020, the Company received a 17% VAT refund of $374 and $51,940, respectively, from the Israel tax authority related to previous tax payments made during the fiscal years 2019 and 2018. These refunds were expensed as incurred in those prior years due to uncertain collection.
6. Going Concern
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt and equity financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that investors will continue to provide capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raises doubts about the Company’s ability to continue as a going concern.
In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company that will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt and/or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
7. Subsequent Events
There were no subsequent events following the period ended September 30, 2020 through the date the financial statements were issued that would materially affect the financial statements.
The following plan of operation 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 of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Plan of Operations
In January 2014, Mr. Weissberg negotiated with Lifewave Ltd., a public company organized under the laws of the State of Israel, for the purpose of acquiring certain of Lifewave’s IP assets pertaining to a wound healing device. The Registrant signed a patent purchase agreement with Lifewave on January 6, 2014 (the “Agreement”), the closing of which was subject to several material conditions, including our ability of raising equity capital sufficient to develop and commercially exploit the technology.
On June 4, 2014, we completed the purchase of all right, title and interest to certain IP assets, including rights to a wound treatment device. The IP assets, including the wound healing device, acquired by the Registrant are designed for wound treatment incorporating Bioelectrical Signal Therapy (“BST Device”). The BST Device implements patented and proprietary electrical stimulation technologies to treat hard-to-cure wounds and ulcers down to complete closure and/or cure.
Pursuant to the Agreement, the Registrant has agreed to pay Lifewave a royalty of from 10% to 20% of the profits (as defined in the Agreement) generated from the BST Device.
The Company engaged IMARC Research Inc. to provide a broad range of services related to its BST Device and the FDA application process. On October 14, 2016, the Company received notification from FDA that it has granted conditional approval to the IDE application, authorizing us to commence a clinical investigation of our BST Device for wound healing. We are dependent upon the success of our FDA application for us to be able to market our BST Device in the U.S.
The Company’s success is dependent upon the successful FDA clinical trial of its BST Device. The Device may need additional development and may never achieve safety or efficacy. The Company believes that its design and procedure show promise, but the path to commercial The Company’s success is dependent upon the successful FDA clinical trial of its BST Device. The Device may need additional development and may never achieve safety or efficacy. The Company believes that its design and procedure show promise, but the path to commercial success, even if development milestones are met, may take more time and might be more costly.
There are a number of potential obstacles the Company might face, including the following:
|●||We may not be able to raise additional funds we may need to complete the clinical trials.|
|●||Competitors may develop alternatives that render BST Device redundant or unnecessary.|
|●||We may not have a sufficient and sustainable intellectual property position.|
|●||Our device may be shown to have harmful side effects or other characteristics that indicate it is unlikely to be safe and effective|
|●||Our device may not receive regulatory approval.|
|●||Even if our device receives regulatory approval, it may not be accepted by patients, the medical community or third-party payers.|
During the first quarter of fiscal 2020, we were granted approval from the Helsinki committee to launch a Randomized Control Study (RCT) on 60-100 patients in order to assess the efficacy of the BST Device on diabetic foot patients in collaboration with Clalit Health Services Organization, Israel’s largest HMO, and the Israeli Ministry of Health (MOH). The study will be performed in 3-5 sites including leading clinics and hospitals in Israel. The Company intends to enroll the first patients to the study during the second quarter of 2021 and expects the trial to be conducted for 12-18 months until completion.
The Company has concluded a 35-wound, one arm clinical pilot, treating recalcitrant wounds in a leading wound clinic in Tel Aviv Israel, with 78% of the treated wounds completely healed within 20 weeks (Avg. wound duration at the base was 8 months) and an additional 16% of the treated wounds reaching wound area reduction of greater than 75%. Only 6% of the patients had no substantial positive clinical effect.
The Company’s distributor in Colombia, TekMedica SAS, has successfully concluded a clinical pilot study at the Hospital de la Samaritana in Bogota, Colombia. Starting in January 2020, Colsanitas, a leading Colombian HMO/Health insurance provider and operator of comprehensive healthcare services in Colombia and a member of the Sanitas group worldwide, will commence a clinical pilot study which is expected to be concluded by the end of the second quarter of 2021. If positive results are achieved, similar to those achieved in the Tel Aviv clinical trials, the Company believes that it will contribute to the penetration of the BST device treatment with Colsanitas health services in Colombia.
During the year ended December 31, 2018, the Company raised $1,795,147 from a rights offering of a total of 9,555,468 Units at $0.10 per Unit, each consisting of: (i) one share of Common Stock; (ii) one Class A Warrant exercisable for a period of 24 months to purchase ½ share of Common Stock at the equivalent of $0.50 per share; and (iii) one Callable Class B Warrant exercisable for a period of 36 months to purchase ½ share of Common Stock at the equivalent of $1.25 per share. The Company intends to use the proceeds of the rights offering for general corporate purposes, including working capital, capital expenditures, as well as acquisitions and other strategic purposes. The warrants fair value is $408,093 and were valued using a Black- Scholes valuation model.
On February 20, 2017, the Registrant received the official certification from the Israeli Ministry of Health authorizing the use of the Registrant’s BST Device in Israel. The BST Device implements patented and proprietary electrical stimulation technologies to treat hard-to-cure wounds and ulcers up to complete closure and/or cure.
On January 8, 2017, the Registrant entered into a five-year distribution agreement (the “Distribution Agreement”) with TekMedica SAS, organized under the laws of Colombia (“TekMedica” or the “Distributor”). Pursuant to the Distribution Agreement, the Registrant granted TekMedica the exclusive rights to distribute the Registrant’s medical device for the treatment of chronic wounds (the “BST Device™”) and the accompanying disposable electrodes (sometimes collectively, the “Products”) in Colombia (the “Territory”).
The Distribution Agreement provides that Registrant will provide Distributor with supplies of the BST Device and disposable electrode for treatment of patients in hospitals, long-term care facilities, medical centers and out-patient clinics. The Distributor will make an initial advance payment to be applied against the first year’s quota together with an initial order supported by a Letter of Credit with subsequent orders as part of the quota, as set forth in the Distribution Agreement, with minimum annual quota’s during the five-year term. The Distributor will be responsible for securing any product certification, permit, license or approval that may be required in the Territory for the marketing, sale, sublicensing and delivery and use of the BST Devise and Products in the Territory.
Results of Operations during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019
We have not generated any revenues during the three-month ended September 30, 2020 and 2019. We had operating expenses mainly related to general and administrative expenses and research and development expenses. During the three months ended September 30, 2020, we incurred a net loss from operations of $169,180 due to general and administrative expenses of $107,681 and research and development expenses of $61,499 as compared to a net loss from operation of $109,564 due to general and administrative expenses of $71,792 and research and development expenses of $37,772 in the same period in the prior year.
Our general and administrative expenses increased by $35,889 during the three months ended September 30, 2020 as compared to the three-months ended September 30, 2019.
Our R&D expenses increased by $23,727 during the three months ended September 30, 2020 as compared to the prior year mainly due to increased expenses related to FDA approval for our BST device.
During the three months ended September 30, 2020 and 2019, we received other income related to tax refunds of $374 and $0, respectively. During the three months ended September 30, 2020 and 2019, we incurred interest expense of $4,181 and $982, respectively.
During the three months ended September 30, 2020 and 2019, we had a net loss of $172,987 and $110,546, respectively.
Results of Operations during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019
We have not generated any revenues during the nine-month period ended September 30, 2020 and 2019. We had operating expenses mainly related to general and administrative expenses and research and development expenses. During the nine months ended September 30, 2020, we incurred a net loss from operations of $455,068 due to general and administrative expenses of $300,217 and research and development expenses of $154,851 as compared to a net loss from operations of $454,092 due to general and administrative expenses of $343,500 and research and development expenses of $110,592 in the same period in the prior year.
Our general and administrative expenses decreased by $43,283 during the nine months ended September 30, 2020 as compared to the three-months ended September 30, 2019.
Our R&D expenses increased by $44,259 during the nine months ended September 30, 2020 as compared to the prior year mainly due to increased expenses related to FDA approval for our BST device.
During the nine months ended September 30, 2020 and 2019, we received other income related to tax refunds of $51,940 and $0, respectively. During the nine months ended September 30, 2020 and 2019, we incurred interest expense of $12,454 and $2,853, respectively.
During the nine months ended September 30, 2019 and 2018, we had a net loss of $415,582 and $456,945, respectively.
Liquidity, Capital Resources and Strategy
On September 30, 2020, we had total assets of $204,365 consisting of cash in the same amount. On December 31, 2019, we had total assets of $18,278 consisting of cash in the same amount. We had total current liabilities of $418,996 as of September 30, 2020 consisting of $1,564 in accrued interest, $251,527 in accrued salaries and $165,905 in loans payable to shareholders. We had total current liabilities of $277,381 as of December 31, 2019 consisting of $4,050 in accounts payable, $1,564 in accrued interest, $105,862 in accrued salaries and $165,905 in loans from shareholders.
We used $261,513 in our operating activities during the nine months ended September 30, 2020, which was due to a net loss of $415,582 offset by imputed interest of $12,454, an increase in accounts payable of $4,050 and an increase in accounts payable and accrued expenses of $145,665.
We used $382,006 in our operating activities during the nine months ended September 30, 2019, which was due to a net loss of $456,945 offset by imputed interest of $2,853, an increase of $4,882 in prepaid expenses and an increase of $67,204 in accounts payable and accrued expenses.
We financed our negative cash flow from operations during the nine months ended September 30, 2020 through proceeds from stock payables of $447,600. We financed our negative cash flow from operations during the nine months ended September 30, 2019 through proceeds of $28,169 from related party borrowings and cash on hand.
We had no investing activities during the nine months ended September 30, 2020 and 2019.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America with an auditor’s going concern opinion for the years 2019 and 2018. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated.
The Company has reported a net loss of $415,582 during the nine months ended September 30, 2020 and $436,812 for the year ended December 31, 2019 and had accumulated deficits of $34,484,919 and $34,069,337 as of September 30, 2020 and December 31, 2019, respectively.
The Company had no revenues from operations during the nine months ended September 30, 2020 and 2019. As of September 30, 2020, the Company had $204,365 cash on hand and had negative working capital of $214,631.
We believe that our current cash on hand of $204,365 as of September 30, 2020, will not be sufficient to meet our operating requirements throughout the ensuing twelve-month period. We require additional financing at satisfactory terms and conditions, of which there can be no assurance, in order to satisfy our ongoing capital requirements for the next twelve months in order to execute our plan of operation as presently constituted.
We do not expect to generate cash flow from operations unless we receive FDA approval for our BST Device.
Our management believes that our operations will generate revenues in the US beginning of 2022. We expect that FDA approval for our BST Device will improve our ability to generate revenues from sales in other geographic areas. Our future ability to generate cash flows from operations will depend on the demand for our BST Device, as well as general economic, financial, competitive and other factors, many of which are beyond our control.
If and when we receive FDA approval of our BST Device, of which there can be no assurance, our business might not generate sufficient future cash flow in an amount sufficient to enable us to fund our liquidity needs, including working capital, capital expenditures, investments and other general corporate requirements.
Availability of Additional Capital
We have no commitments or arrangements, formal or otherwise, from any person or entity to provide us with any additional capital. The Company may be unable to implement its present plan of operation and this could have a material adverse effect on our business, prospects, financial condition and results of operations.
Our future financing transactions may include the issuance of equity and/or debt securities. In the event that we seek to raise funds through additional private placements of equity or convertible debt, the trading price of our common stock could be adversely affected. Further, if we issue additional equity or debt securities, stockholders may experience dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. We are not aware of any material trend, event or capital commitment, which would or could potentially adversely affect our liquidity. We do not have any arrangements with potential investors or lenders to provide us with any additional financing and there can be no assurance that any such additional financing will be available when required in order to proceed with the business plan.
Evaluation of disclosure controls and procedures.
As of September 30, 2020, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as September 30, 2020. Management has identified corrective actions to address the weaknesses and plans to implement them during the fiscal year 2020.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the period covered by this report, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. However, from time to time, we may become a party to certain legal proceedings in the ordinary course of business.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1. Description of Business, subheading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition or future results.
(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.
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/ Ohad Goren|
|Chief Executive Officer|
|(Principal Executive Officer)|
|Date:||November 13, 2020|
|By:||/s/ Gal Peleg|
|Chief Financial Officer|
|(Principal Financial and Principal Accounting Officer)|
|Date:||November 13, 2020|