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, 2019March 31, 2020
or
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________________ to ________________
Commission file number: 000-55680
TECHCARE CORP.
(Exact Name Of Registrant As Specified In Its Charter)
(in process of name change to CITRINE GLOBAL, CORP.)
| Delaware | 68-0080601 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices) | (ZIP Code) |
| + (972) |
| Registrant’s Telephone Number, Including Area Code: |
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 every Interactive Data File required to be submitted 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 such files). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] | Non-Accelerated filer [X] | 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. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Securities registered pursuant to Section 12(b) of the Act:
On November 17, 2019,June 29, 2020, the registrant had 35,449,398494,721,815 shares of common stock, par value $0.0001 per share, outstanding.
The registrant is relying on the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies (Securities and Exchange Commission Release No. 34-88465 dated March 25, 2020), which concerns exemptions from certain filing deadlines in light of coronavirus disease 2019 (COVID-19). The registrant could not file this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020 on a timely basis because the outbreak of COVID-19 in Israel and attendant restrictions on life in Israel, which included, among others, our team and advisors being required to work from home, combined with the additional workload involved in completing the transactions reported by the Registrant during the first quarter of this year for the issuance and sale of shares in the Registrant and the sale of shares in its subsidiary Novomic Ltd, caused delays in completing the required work.
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance SheetsCONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2019(U.S. dollars except share and December 31, 2018
(Unaudited)per share data)
| September 30, 2019 | December 31, 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 125,691 | $ | 474,715 | ||||
| Inventory | 197,578 | 248,912 | ||||||
| Accounts receivable | 31,615 | 13,462 | ||||||
| Inventory subject to refund | 3,465 | 44,529 | ||||||
| Other receivables | 15,360 | 176,583 | ||||||
| Total current assets | 373,709 | 958,201 | ||||||
| Non-current assets: | ||||||||
| Severance pay fund, net | 18,091 | - | ||||||
| Long-term deposits | 11,746 | 11,366 | ||||||
| Operating lease right of use asset, net | 107,512 | - | ||||||
| Property and equipment, net | 155,509 | 161,401 | ||||||
| Total non-current assets | 292,858 | 172,767 | ||||||
| Total assets | $ | 666,567 | $ | 1,130,968 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 163,593 | $ | 231,311 | ||||
| Note payable | 80,026 | 80,026 | ||||||
| Current maturities of long-term operating lease liability | 23,990 | - | ||||||
| Derivative liability | 763 | - | ||||||
| Refund liability | 1,827 | 73,464 | ||||||
| Total current liabilities | 270,199 | 384,801 | ||||||
| Non-current liability: | ||||||||
| Lease operating liability | 83,522 | - | ||||||
| Liability for severance pay, net | - | 4,713 | ||||||
| Total liabilities | 353,721 | 389,514 | ||||||
| Redeemable preferred stock: | ||||||||
| Redeemable Series A preferred stock, par value $0.0001 per share 12,413,794 shares authorized; 8,275,862 and 0 issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 240,000 | - | ||||||
| Stockholders’ equity: | ||||||||
Preferred stock, par value $0.0001 per share, 50,000,000 shares authorized; none issued and outstanding at September 30, 2019 and December 31, 2018, respectively | - | - | ||||||
| Common stock, par value $0.0001 per share, 500,000,000 shares authorized; 35,449,398 and 33,212,036 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 3,545 | 3,322 | ||||||
| Accumulated other comprehensive income | 122,180 | 106,870 | ||||||
| Additional paid-in capital | 9,987,533 | 9,329,419 | ||||||
| Stock to be issued | 30,000 | 30,000 | ||||||
| Accumulated deficit | (10,070,412 | ) | (8,728,157 | ) | ||||
| Total stockholders’ equity | 72,846 | 741,454 | ||||||
| Total liabilities and stockholders’ equity | $ | 666,567 | $ | 1,130,968 | ||||
| March 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (Unaudited) | ||||||||
| A s s e t s | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | 14,010 | 17,636 | ||||||
| Inventory | 26,669 | 34,513 | ||||||
| Accounts receivable | 14,576 | 9,141 | ||||||
| Inventory subject to refund | 794 | 2,159 | ||||||
| Prepaid share based payment to a service provider | 4,306,500 | |||||||
| Other current assets | 24,531 | 18,522 | ||||||
| Total Current assets | 4,387,080 | 81,971 | ||||||
| Non-current assets | ||||||||
| Right of use asset | 12,781 | 14,502 | ||||||
| Long-term deposits | 4,555 | 4,699 | ||||||
| Property and equipment, net | 138,652 | 155,655 | ||||||
| Total non-current assets | 155,988 | 174,856 | ||||||
| T o t a l assets | 4,543,068 | 256,827 | ||||||
| Liabilities and Shareholders’ Equity (Deficit) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | 199,915 | 223,841 | ||||||
| Notes payable to related parties | 265,939 | 123,494 | ||||||
| Deferred Revenue | 4,846 | 4,998 | ||||||
| Current maturities of long-term lease liability | 8,098 | 7,295 | ||||||
| Total current liabilities | 478,798 | 359,628 | ||||||
| Non-current liability | ||||||||
| Lease liability | 5,017 | 7,962 | ||||||
| Total non-current liability | 5,017 | 7,962 | ||||||
| T o t a l liabilities | 483,815 | 367,590 | ||||||
| Redeemable convertible preferred stock | ||||||||
| Redeemable convertible Series A preferred stock, par value $0.0001 per share 12,413,794 shares authorized; 0 and 10,344,828 issued and outstanding at March 31, 2020 and December 31, 2019, respectively | - | 300,000 | ||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock (excluding redeemable Series A preferred stock), par value $0.0001 per share, 37,586,206 shares authorized at March 31, 2020 and December 31, 2019; none issued and outstanding at March 31, 2020 and December 31, 2019 | - | - | ||||||
| Common stock, par value $0.0001 per share, 500,000,000 shares authorized; 494,721,815 and 35,449,400 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively | 49,472 | 3,545 | ||||||
| Additional paid-in capital | 15,164,986 | 10,042,496 | ||||||
| Stock to be issued | 30,000 | 30,000 | ||||||
| Accumulated deficit | (11,291,041 | ) | (10,602,292 | ) | ||||
| Accumulated other comprehensive income | 105,836 | 115,488 | ||||||
| T o t a l stockholders’ equity (deficit) | 4,059,253 | (410,763 | ) | |||||
| T o t a l liabilities and stockholders’ equity (deficit) | 4,543,068 | 256,827 | ||||||
The accompanying notes are an integral part of thesethe condensed consolidated financial statements.
| 3 |
Condensed Consolidated Statements of OperationsCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars except share and Comprehensive loss
For the Nine and Three Month Periods ended September 30, 2019 and 2018
(Unaudited)per share data)
| Three months ended | ||||||||||||||||||||||||
| Nine months ended | Three months ended | March 31 | ||||||||||||||||||||||
| September 30, | September 30, | 2020 | 2019 | |||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | (Unaudited) | ||||||||||||||||||||
| Revenues | 120,849 | 188,809 | 35,652 | 90,367 | 11,372 | 58,171 | ||||||||||||||||||
| Cost of revenues | 150,384 | 128,842 | 32,656 | 71,224 | (13,621 | ) | (54,388 | ) | ||||||||||||||||
| Gross profit (loss) | (29,535 | ) | 59,967 | 2,996 | 19,143 | (2,249 | ) | 3,783 | ||||||||||||||||
| Research and development expenses | 114,511 | 191,316 | 34,479 | 143,400 | (17,586 | ) | (40,807 | ) | ||||||||||||||||
| Marketing, general and administrative expenses | 1,177,133 | 1,489,784 | 365,806 | 522,864 | (667,671 | ) | (435,211 | ) | ||||||||||||||||
| Change in fair value of option liability | (6,944 | ) | (132,470 | ) | (6,944 | ) | - | |||||||||||||||||
| Operating loss | 1,314,235 | 1,488,663 | 390,345 | 647,121 | (691,502 | ) | (472,235 | ) | ||||||||||||||||
| Financing income (expenses), net | 2,753 | (6,592 | ) | |||||||||||||||||||||
| Net loss attributable to common stockholders | (688,749 | ) | (478,827 | ) | ||||||||||||||||||||
| Financial expenses (income), net | 28,020 | 26,265 | 15,314 | 9,110 | ||||||||||||||||||||
| Loss per common stock (basic and diluted) | (0.00 | ) | (0.01 | ) | ||||||||||||||||||||
| Net loss | $ | 1,342,255 | 1,514,928 | 405,659 | 656,231 | |||||||||||||||||||
| Net loss per common stock: | ||||||||||||||||||||||||
| Basic | $ | (0.04 | ) | (0.05 | ) | (0.01 | ) | (0.02 | ) | |||||||||||||||
| Weighted average number of common stock outstanding: | ||||||||||||||||||||||||
| Basic | 34,680,182 | 31,709,944 | 35,449,398 | 32,529,717 | ||||||||||||||||||||
| Basic weighted average number of shares of common stock outstanding | 174,610,261 | 36,496,768 | ||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||
| Net loss | 1,342,255 | 1,514,928 | 405,659 | 656,231 | (688,749 | ) | (478,827 | ) | ||||||||||||||||
| Other comprehensive loss (income) attributable to foreign currency translation | (15,311 | ) | (7,003 | ) | (5,777 | ) | 8,702 | |||||||||||||||||
| Other comprehensive income (expense) attributable to foreign currency translation | (9,652 | ) | 4,815 | |||||||||||||||||||||
| Comprehensive loss | 1,326,944 | 1,507,925 | 399,882 | 664,933 | (698,401 | ) | (474,012 | ) | ||||||||||||||||
The accompanying notes are an integral part of thesethe condensed consolidated financial statements.
| 4 |
Condensed Consolidated Statements of changes in Stockholders’ EquityCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) AND REDEEMABLE CONVERTIBLE PREFERRED STOCK
(Unaudited)(U.S. dollars, except share and per share data)
| Redeemable convertible preferred stock | Common stock | Additional paid-in | Stock to be | Accumulated | Accumulated other comprehensive | Total stockholders’ | ||||||||||||||||||||||||||||||
| Stock | Amount | Stock | Amount | capital | issued | deficit | income | equity | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2018 | - | - | 33,212,036 | 3,322 | 9,329,419 | 30,000 | (8,728,157 | ) | 106,870 | 741,454 | ||||||||||||||||||||||||||
| CHANGES DURING THE PERIOD OF THREE MONTHS ENDED MARCH 31, 2019: | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock and warrants, net | - | - | 957,854 | 95 | 232,355 | - | - | - | 232,450 | |||||||||||||||||||||||||||
| Waiver of fee by related party | - | - | - | - | 89,833 | - | - | - | 89,833 | |||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | 3,120 | - | - | - | 3,120 | |||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | - | 4,815 | 4,815 | |||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | (478,827 | ) | - | (478,827 | ) | |||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2019 | - | - | 34,169,890 | 3,417 | 9,654,727 | 30,000 | (9,206,984 | ) | 111,685 | 592,845 | ||||||||||||||||||||||||||
| Redeemable convertible preferred stock | Common stock | Additional paid-in | Stock to be | Accumulated | Accumulated other comprehensive | Total stockholders’ | ||||||||||||||||||||||||||||||
| Stock | Amount | Stock | Amount | capital | issued | deficit | income | deficit | ||||||||||||||||||||||||||||
| 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 | - | - | 433,927,587 | 43,393 | 28,607 | - | - | - | 72,000 | |||||||||||||||||||||||||||
| Issuance of common stock to service provider | - | - | 15,000,000 | 1,500 | 4,783,500 | - | - | - | 4,785,000 | |||||||||||||||||||||||||||
| Waiver of fee by related party | - | - | - | - | 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 | ||||||||||||||||||||||||||
TECHCARE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars)
| Three months ended | ||||||||
| March 31, | ||||||||
| 2020 | 2019 | |||||||
| (Unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | (688,749 | ) | (478,827 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 6,664 | 7,177 | ||||||
| Right of use asset depreciation | 1,278 | 130 | ||||||
| Lease liability | - | (130 | ) | |||||
| Inventory subject to refund | 1,299 | 12,573 | ||||||
| Refund liability | - | (27,743 | ) | |||||
| Net investment in right of use asset | (2,205 | ) | - | |||||
| Share based payment to a service provider | 478,500 | 3,120 | ||||||
| Management fee waiver | 11,417 | 89,833 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivables | (5,714 | ) | - | |||||
| Other current assets | (6,410 | ) | 100,795 | |||||
| Inventory | 6,789 | 32,599 | ||||||
| Accounts payable and accrued expenses | (21,342 | ) | (51,474 | ) | ||||
| Severance payment, net | - | (7,672 | ) | |||||
| Net cash used in operating activities | (218,473 | ) | (319,619 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | - | (3,742 | ) | |||||
| Investment in long-term deposit | - | (6,844 | ) | |||||
| Net cash provided by investing activities | - | (10,586 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from related parties loans | 154,341 | - | ||||||
| Proceeds from issuance of common stock | 72,000 | 232,450 | ||||||
| Net cash provided by financing activities | 226,341 | 232,450 | ||||||
| Effect of exchange rates on cash and cash equivalents | (11,494 | ) | (6,260 | ) | ||||
| Net increase in cash and cash equivalents | (3,626 | ) | (104,015 | ) | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 17,636 | 474,715 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 14,010 | 370,700 | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non cash transactions: | ||||||||
| Conversion preferred stock to common stock | 300,000 | - | ||||||
Consolidated statements of stockholders’ equity for nine months ended September 30, 2019:
| Common Stock | Additional Paid-in | Stock To Be | Accumulated | Accumulated Other Comprehensive | Total | |||||||||||||||||||||||
| Stock | Amount | Capital | Issued | Deficit | Income | Stockholders’ | ||||||||||||||||||||||
| Balance at December 31, 2018 | 33,212,036 | 3,322 | 9,329,419 | 30,000 | (8,728,157 | ) | 106,870 | 741,454 | ||||||||||||||||||||
| Issuance of common stock | 2,237,362 | 223 | 457,232 | - | - | - | 449,748 | |||||||||||||||||||||
| Option liability | - | - | (7,707 | ) | - | - | - | (7,707 | ) | |||||||||||||||||||
| Waiver of fee by related party | - | - | 199,237 | - | - | - | 199,237 | |||||||||||||||||||||
| Stock-based compensation | - | - | 9,352 | - | - | - | 9,352 | |||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | 15,310 | 15,310 | |||||||||||||||||||||
| Net loss for the period | - | - | - | - | (1,342,255 | ) | - | (1,342,255 | ) | |||||||||||||||||||
| Balance at September 30, 2019 | 35,449,400 | 3,545 | 9,987,533 | 30,000 | (10,070,412 | ) | 122,180 | 72,846 | ||||||||||||||||||||
Consolidated statements of stockholders’ equity for nine months ended September 30, 2018:
| Common Stock | Additional Paid-in | Stock To Be | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||
| Stock | Amount | Capital | Issued | Deficit | Income | Equity | ||||||||||||||||||||||
| Balance at December 31, 2017 | 25,835,401 | 2,584 | 6,945,151 | 30,000 | (6,571,083 | ) | 104,777 | 511,429 | ||||||||||||||||||||
| Issuance of common stock and warrants, net | 4,113,695 | 411 | 1,591,591 | - | - | - | 1,592,002 | |||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | 7,003 | 7,003 | |||||||||||||||||||||
| Stock-based compensation | - | - | 27,544 | - | - | - | 27,544 | |||||||||||||||||||||
| Funds Received for Shares | - | - | - | 30,000 | - | - | 30,000 | |||||||||||||||||||||
| Net loss for the period | - | - | - | - | (1,514,928 | ) | - | (1,514,928 | ) | |||||||||||||||||||
| Balance at September 30, 2018 | 29,949,096 | 2,995 | 8,564,286 | 60,000 | (8,086,011 | ) | 111,780 | 653,050 | ||||||||||||||||||||
The accompanying notes are an integral part of thesethe condensed consolidated financial statements.
Condensed Consolidated Statements of changes in Stockholders’ Equity
(Unaudited)
Consolidated statements of stockholders’ equity for three months ended September 30, 2019:
| Common Stock | Additional Paid-in | Stock To Be | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||
| Stock | Amount | Capital | Issued | Deficit | Income | Equity | ||||||||||||||||||||||
| Balance at June 30, 2019 | 35,449,400 | $ | 3,545 | 9,931,207 | 30,000 | (9,664,753 | ) | $ | 116,403 | $ | 416,404 | |||||||||||||||||
| Waiver of fee by related party | - | - | 54,339 | - | - | - | 54,339 | |||||||||||||||||||||
| Stock-based compensation | - | - | 3,117 | - | - | - | 3,117 | |||||||||||||||||||||
| Option liability | - | - | (1,130 | ) | - | - | - | (1,130 | ) | |||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | 5,777 | 5,777 | |||||||||||||||||||||
| Net loss for the period | - | - | - | - | (405,659 | ) | - | (405,659 | ) | |||||||||||||||||||
| Balance at September 30, 2019 | 35,449,400 | 3,545 | 9,987,533 | 30,000 | (10,070,412 | ) | 122,180 | 72,846 | ||||||||||||||||||||
Consolidated statements of stockholders’ equity for three months ended September 30, 2018:
| Common Stock | Additional Paid-in | Stock To Be | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||
| Stock | Amount | Capital | Issued | Deficit | Income | Equity | ||||||||||||||||||||||
| Balance at June 30, 2018 | 28,160,982 | 2,816 | 7,863,463 | 72,000 | (7,429,780 | ) | 103,078 | 611,577 | ||||||||||||||||||||
| Funds Received for Shares | 1,788,114 | 179 | 691,821 | - | - | - | 692,000 | |||||||||||||||||||||
| Stock-based compensation | - | - | 9,002 | - | - | - | 9,002 | |||||||||||||||||||||
| Funds Received for Shares | - | - | - | (12,000 | ) | - | - | (12,000 | ) | |||||||||||||||||||
| Other comprehensive income (expenses) | - | - | - | - | - | 8,702 | 8,702 | |||||||||||||||||||||
| Net loss for the period | - | - | - | (656,231 | ) | - | (656,231 | ) | ||||||||||||||||||||
| Balance at September 30, 2018 | 29,949,096 | 2,995 | 8,564,286 | 60,000 | (8,086,011 | ) | 111,780 | 653,050 | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
Condensed Consolidated Statements of Cash Flows
For the Nine Month Periods ended September 30, 2019 and 2018
(Unaudited)
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (1,342,255 | ) | (1,514,928 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 21,811 | 17,681 | ||||||
| Change in fair value of option liability | (6,944 | ) | (132,470 | ) | ||||
| Right of use asset depreciation | 11,242 | - | ||||||
| Finance expenses, net | 999 | - | ||||||
| Inventory subject to refund | 43,157 | - | ||||||
| Management fee waiver | 199,237 | - | ||||||
| Stock-based compensation | 9,352 | 27,544 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Lease liability | (12,241 | ) | - | |||||
| Accounts receivables | (16,949 | ) | (172,917 | ) | ||||
| Other receivables | 169,222 | (137,960 | ) | |||||
| Inventory | 68,362 | (120,978 | ) | |||||
| Accounts payable and accrued expenses | (82,609 | ) | 151,413 | |||||
| Refund liability | (74,994 | ) | 107,088 | |||||
| Severance payment, net | (22,791 | ) | (3,129 | ) | ||||
| Net cash used in operating activities | (1,035,423 | ) | (1,778,656 | ) | ||||
| Cash flow from investing activities: | ||||||||
| Purchase of fixed assets | (3,888 | ) | (59,009 | ) | ||||
| Long-term deposit | 603 | - | ||||||
| Net cash used in investing activities | (3,285 | ) | (59,009 | ) | ||||
| Cash flow from financing activities: | ||||||||
| Proceeds from issuance of common stock and warrants, net | 698,585 | 1,592,000 | ||||||
| Proceeds from stock to be issued | - | 30,000 | ||||||
| Net cash provided by financing activities | 698,585 | 1,622,000 | ||||||
| Effect of exchange rates on cash and cash equivalents | (8,901 | ) | 10,342 | |||||
| Net decrease in cash and cash equivalents | (349,024 | ) | (205,323 | ) | ||||
| Cash and cash equivalents - beginning of period | 474,715 | 589,818 | ||||||
| Cash and cash equivalents - end of period | $ | 125,691 | 384,495 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
TechCare Corp.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Notes to Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Nature of operations1 - GENERAL
TechCare Corp. (“Techcare” or the “Company”) (in process of name change to Citrine Global, Corp.) 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 market under the ticker symbol “TECR.”
On February 8, 2016,As reported in the Company’s annual report on Form 10-K for the year ended December 31, 2019, the Company’s Board of Directors explored during 2019 strategic alternatives to enhance stockholder value, which the Company signedhad previously reported might include future acquisitions, a Merger Agreementmerger with another company, the sale of the Company as a public shell company, or a potential sale of certain assets, including the Company’s wholly owned subsidiary Novomic Ltd. (“Novomic”), a private company incorporated under the laws of the state of Israel. The closing of the merger took place on August 9, 2016, pursuant to which Novomic became a wholly-owned subsidiary of the Company.
Novomic was incorporated as a private company in Israel in 2009. Since inception, Novomic has been a technology company engaged in the design, development and commercialization of a unique proprietary and patented delivery platform utilizing vaporization of various natural compounds for multiple health, beauty and wellness applications. Novomic’s delivery platform is proprietary and patented.
Novomic’s first product is Novokid® - an innovative home use device which vaporizes a natural, plant-based, pesticides and silicone-free compound that effectively treats head lice and eggs. The Novokid® kit includes a vaporizer, treatment capsules and treatment cap alongside ancillary components. Novokid® is currently being sold in Israel and the Netherlands.
Novomic is currently working on the research and developmentAs of future product offerings for its delivery platform, including Shine, a revolutionary cosmetic device for the treatment and rejuvenation of the hair and scalp.
The Company operates in one operating segment and substantially all assets of the Company and subsidiary are located in Israel.
Going Concern
During the period ended September 30,December 31, 2019, the Company had a total comprehensive loss of $1.3 million and had incurred $1 million loss from operating cash flow. As of September 30, 2019, the Company incurred accumulated losses of approximately $10 million. Based$10.6 million, and based on the projected cash flows and Company’s cash balance, as of September 30, 2019, the Company’s management iswas of the opinion that without further fundraising it willwould not have sufficient resources to enable it to continue advancing its activities, including the development, manufacturing, and marketing of its products.
On November 21, 2019, in light of the above, and after the board of directors of the Company reached the conclusion that the Company would not be able to successfully commercialize any products or secure sufficient financing, the Company entered into a Memorandum of Understanding with Citrine S A L Investment & Holdings Ltd., which provided for the issuance and sale of a number of shares resulting in Citrine S A L Investment & Holdings Ltd and/or its designee(s) holding 95% of the fully diluted capital stock of the Company, and the sale by the Company of 90% of its shares in Novomic.
On January 6, 2020, definitive agreements were executed for the sale of 90% of the shares in Novomic to Traistman Radziejewski Fundacja Ltd., which was completed on May 14, 2020, and for the issuance and sale of a number of shares equal after the issuance to 95% of the fully diluted capital stock of the Company to Citrine S A L Investment & Holdings Ltd. and a group of related persons and entities (the “TechCare Transaction”). Traistman Radziejewski Fundacja Ltd. is controlled by Oren Traistman, which is one of the Company’s beneficial shareholders and was a director of the Company until February 27, 2020.
On February 23, 2020, the Company entered into an agreement amending and restating the January 6, 2020 agreement concerning the TechCare Transaction, which provided for the issuance and sale of the shares in stages. Pursuant to this agreement, on February 27, 2020 and March 5, 2020, 432,996,555 shares of common stock of the Company were issued to Citrine S A L Investment & Holdings Ltd and its group of related persons and entities, resulting in a change of control of the Company. The amended and restated agreement provided for the issuance of 893,699,276 shares of common stock in total in consideration for $150,000, however the Company was unable to complete the issuance of all these shares at that time because the Company was authorized under its certificate of incorporation to issue only up to 500,000,000 shares of common stock. The Company’s certificate of incorporation was amended on May 14, 2020, increasing its authorized share capital by one billion shares of common stock, after it filed an information statement of Form 14C. The Company is currently working towards completing the issuance of an additional 445,702,721 shares of common stock of the Company.
During Q1 2020 the Company continued selling the Novokid® product produced by Novomic both through online and physical sales channels, including through its own website. Novomic is not presented as held for sale, although the held-for-sale criteria are met, because the Company concluded that the disposal of 90% of Novomic’s shares is comprised of substantially almost all of the Company’s net assets and operations and since the separate presentation of such a significant portion of the entity’s net assets as a single line item on the balance sheet would not be meaningful to financial statement users.
Also, during Q1 2020, the Company began its plans for a periodnew business activity. The Company’s new business activity comprises creating value and implementing expansion strategies for growth-stage technology companies. The Company believes the health, wellness, food tech and Israeli medical cannabis fields are demonstrating high growth potential, and, therefore, the Company has begun its focus on these sectors. The Company aims to empower innovative companies to become global leaders and improve the health and quality of at least 12life of as many people as possible worldwide. The Company aims to support local and global expansion of such target companies via an array of services customized to each company’s needs, from assistance with strategic business planning to solving real estate-related and finance issues. The Company plans to offer multi-strategy solutions combining strategic marketing, business development, real estate and asset management services and financing solutions. By offering such a wide spectrum of services, the Company aims to help create an integrated strategy that supports its target companies in achieving their local and global expansion ambitions. The Company seeks to work proactively and collaboratively with the target companies in order to allow them to scale quickly and achieve their milestones.
As part of this process, the Company created a new Israeli subsidiary CTGL – Citrine Global Israel Ltd (company number 516201159), which was incorporated on June 3, 2020.
Based on the Company’s current cash balances, capital raised in the second quarter of 2020 and the irrevocable letter it has received (as noted below), the Company has sufficient funds for its plans for the next twelve months from the date of issuance of these financial statements. As a result, thereCurrently, as the Company is substantial doubt about the Company’s ability to continueembarking on its new activity as a going concern.detailed herein, it is incurring losses and cannot determine with reasonable certainty when and if it will have sustainable profits.
Management’sCitrine S A L Investment & Holdings Ltd., 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, 2021 that will allow it to be operational as planned and budgeted through this period.
On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (SARS-CoV-2) to be a global pandemic (COVID-19), which continues to spread throughout the world. The COVID-19 pandemic is having significant effects on global markets, supply chains, businesses, and communities. Specific to the Company, COVID-19 may impact various parts of its 2020 plans, operations and financial results including but not limited to difficulties in obtaining additional financing. The Company believes it is taking appropriate actions to mitigate the negative impact, including by focusing its activities initially on Israel. However, the full impact of COVID-19 is unknown and cannot be reasonably estimated as these events are still developing.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Unaudited Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements include the continued commercialization of their products, to continue taking cost reduction steps and securing sufficient financing through the sale of additional equity securities, debt or capital inflows from strategic partnerships and exploring strategic alternatives to enhance stockholder value, which may include future acquisitions, a merger with another company, a potential sale of certain assets, including Novomic, or the saleaccounts of the Company as a public shell company. There are no assurances, however, thatand its subsidiary, prepared in accordance with accounting principles generally accepted in the Company will be successful in obtainingUnited States of America (“GAAP”) and with the levelinstructions to Form 10-Q. In the opinion of financing needed for its operations. Ifmanagement, the Company is unsuccessful in commercializing its products and securing sufficient financing, it may need to reduce activities, or curtail or cease operations. The financial statements dopresented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for three-months ended March 31, 2020 and 2019. However, these results are not includenecessarily indicative of results for any adjustments relatingother interim period or for the year ended December 31, 2020.
Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the recoverabilityrules of the U.S. Securities and classification of recorded assetsExchange Commission (“SEC”). These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the amounts and classification of liabilities that might be necessary shouldCompany’s Annual Report on Form 10-K filed with the Company be unable to continue as a going concern.SEC on May 11, 2020 for the year ended December 31, 2019
| 8 |
TechCare Corp.
Notes to Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.):
B. Summary of significant accounting policies
The accounting policies adopted are consistent with those of the previous financial year.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and condensed footnotes have been 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 the accounting principles generally accepted in the United States of America (“U.S. GAAP”), for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for fair statement of results for the interim periods presented have been included. The results of operations for nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the period or for future years. The consolidated balance sheet as of December 31, 2018 is derived from audited financial statements as of that date; however, it does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on March 28, 2019.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of TechCare, and its subsidiary, Novomic. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the financial statements in conformity with U.S. 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 revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Functional Currency and Foreign Currency Translation and Transactions.
The currency of the primary economic environment in which the operations of the Company and its subsidiary are conducted is the New Israeli Shekel (“NIS”).
The presentation currency of the financial statements is the U.S. dollar. Assets and liabilities are translated at year-end exchange rates, while revenues and expenses are translated at actual exchange rates during the year. Differences resulting from translation are presented in equity, under accumulated other comprehensive income (loss). Gains and losses arising from foreign currency transactions of monetary balances denominated in non-functional currencies are reflected in financial income (expense), net in the consolidated statements of operations and comprehensive loss.
Financial expenses (income), net in the consolidated statements of operations and comprehensive loss comprised mainly of exchange rate differentials.
TechCare Corp.
Notes to Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.):
B. Summary of significant accounting policies (Cont.):
Impairment of long-lived assets
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In the event that the sum of the expected future undiscounted cash flows expected to be generated by the long-lived assets is less than the carrying amount of such assets, an impairment charge would be recognized and the assets would be written down to their estimated fair values. During the periods ended September 30, 2019, and 2018, no impairment was recorded.
Fair Value Measurements
Fair value is defined as 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. 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. Observable inputs are inputs that are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset or liability. Unobservable inputs are inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability. The fair value hierarchy categorizes into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2 inputs include inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Preferred stock subject to possible redemption
The Company’s Series A convertible preferred stock includes certain redemption rights that are not considered to be solely within the Company’s control. The Company accounted for its contingently redeemable preferred stock in accordance with Accounting Standard Codification Topic 480, “Distinguishing Liabilities from Equity, and classified them accordingly as temporary equity (mezzanine equity).” The Series A convertible preferred stock are presented at their redemption value, outside of stockholders’ equity. The Company classified the call options that permits the holder of Series A convertible preferred stock to compel the purchase its contingently redeemable preferred stock as a liability.
TechCare Corp.
Notes to Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements Adopted in Current Period
In FebruaryJune 2016, the FASB issued ASU 2016-13, Financial Accounting Standards Board issued Accounting Standards Update 2016-02 “Leases.” TheInstruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. This guidance establishes a right-of-use (“ROU”) model that requires a lesseereplaces the current incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an ROU assetallowance that reflects its current estimate of credit losses expected to be incurred over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2018-19 clarifies that receivables from operating leases are accounted for using the lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classifiedguidance and not as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. financial instruments.
The guidance became effective on January 1, 2019. A2020, including interim periods within that year and requires a modified retrospective transition approach is required, applyingthrough a cumulative-effect adjustment to retained earnings as of the new standard to all leases existing atbeginning of the dateperiod of initial application.adoption. Under the modified retrospective method of adoption, prior year reported results are not restated. The adoptionCompany has performed its analysis of the impact on its financial instruments that are within the scope of this standard did not have aguidance and has concluded that there is no material effect on the Company’simpact to its consolidated financial statements.
The Company adopted the new accounting standard Accounting Standards Codification 842 “Leases,” and all the related amendments, on January 1, 2019 and used the standard’s effective date as the Company’s date of initial application. Consequently, financial information was not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The new standard also provides practical expedients for an entity’s ongoing accounting. The adoption of this standard did not have a material effect on the Company’s financial statements. On January 1, 2019, the Company recognized ROU assets of approximately $113 thousand and lease liabilities of approximately $113 thousand for its operating leases of real estate and vehicles. The adoption of this standard did not have a material impact on the Company’s consolidated statements of income and consolidated statements of cash flows.
NOTE 3: INCOME TAXES3– SHAREHOLDERS’ EQUITY
a. BasisOn January 29, 2020, holders 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).
b. Carryforward Tax Losses
Carryforward Tax Losses of the Company as of September 30, 2019, amounted to approximately $0.5 million. Carryforward Tax Losses of Novomic amounted to approximately $6.8 million.10,344,828 Redeemable convertible Series 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, 2019.
NOTE 4: LOSS PER SHARE
Loss per share is based on the loss that is attributed to the aggregate number of outstandingpreferred stock, par value $0.0001, converted their shares into shares of common stock, divided bypar value $0.0001. See also Note 5h below.
During February and March 2020, the weighted average numberCompany issued 432,996,555 shares of common stock, par value $0.0001, to investors in respect of the transaction described in note 1 above, for total consideration of $45,000.
The terms ofthe transaction for the issuance of 893,699,276 shares of common stock in issue duringtotal are described in Note 1 above. As of the period.date of this report on Form 10Q 445,702,721 shares of common stock have not yet been issued.
TechCare Corp.
NotesOn March 5, 2020 the Company issued 15,000,000 shares of common stock, par value $0.0001, to Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)its legal advisor in respect of legal consulting services, with respect to the Techcare Transaction as well as other legal services, as agreed between the parties, which is expected to be provided until the end of 2020. The Company estimated the fair value of the shares issued based on the share price at the grant date at $4,785 thousand of which $479 thousand was recorded as share based compensation expense in the three month ended March 31, 2020, and the remaining was recorded as prepaid share based payment. The prepaid services will be expensed over the attribution period of the remaining legal consulting services. Such expense is included in the Marketing, general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss.
NOTE 5: FAIR VALUE OF FINANCIAL INSTRUMENTS4 – STOCK OPTIONS
The carrying amount of the Company’s financial instruments, including cash equivalents, accounts receivable and other current assets, accounts payable and accrued liabilities and note payable 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 reconciliationpresents the Company’s stock option activity for employees and directors of the changeCompany for the financial liability where fair value measurement is estimated utilizing Level 3 inputs:three months ended March 31, 2020:
| 2019 | 2018 | |||||||
| US dollar | US dollar | |||||||
| Fair value as of January 1 | $ | - | 132,470 | |||||
| Issuance of a derivative liability | 7,707 | - | ||||||
| Change in fair value recognized in statement of operations and comprehensive loss | (6,944 | ) | (132,470 | ) | ||||
| Fair value as of September 30 | $ | 763 | - | |||||
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31,2019 | 521,065 | 0.0011 | ||||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Forfeited or expired | (474,303 | ) | 0.0011 | |||||
| Outstanding at March 31,2020 | 46,762 | 0.0011 | ||||||
| Number of options exercisable at March 31, 2020 | 46,762 | 0.0011 | ||||||
NOTE 6:5 – RELATED PARTY TRANSACTIONSPARTIES
| a) | On |
| On December 31, 2015, the Company entered into a consulting agreement with Zvi Yemini, |
| On July 31, 2016, the Company entered into a consulting agreement with Mr. Oren Traistman, who was a member of the |
| On December 31, 2017, the Company entered into a consulting agreement with Mr. Ran Tuttnauer, a member of the advisory Board. Pursuant to the consulting agreement, Mr. Tuttnauer |
TechCare Corp.
Notes to Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
e) | On April 28, 2019, the Company entered into a form of Securities Purchase Agreement with each of Y.M.Y. Industry Ltd. (“YMY”), Traistman Radziejewski Fundacja Ltd. (“TRF”) and Microdel Ltd. (together with YMY and TRF, the “Investors”) relating to an offering of an aggregate of 1,229,508 shares of the Company’s common stock at a purchase price of $0.183 per share for aggregate gross proceeds of approximately $225,000. In addition, the Company granted the |
On August 20, 2019, the Company entered into an additional form of securities purchase agreement with YMY and TRF, relating to an offering of an aggregate of 8,275,862 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $240,000. In addition, the Company granted YMY and TRF an option, for a period of twelve months, to purchase an additional 400,000 Series A Convertible Preferred Stock, in the aggregate, at a price per share of $0.60, for additional aggregate consideration of $240,000. The closing of the offering took place on August 29, 2019. |
| g) | On October 23, 2019, Novomic appointed Idan Traitsman to serve as the Chief Executive Officer of Novomic, effective immediately. In connection with Mr. Traitsman’s appointment, the Company agreed to pay Mr. Traitsman a
|
| h) | On November 17, 2019, the Company entered into a form of securities purchase agreement with YMY and TRF, relating to an offering of an aggregate of 2,068,966 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $60,000 in 2019 and 931,034 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $27,000 in 2020. In addition, the Company granted YMY and TRF an option, for a period of twelve months, to purchase up to an additional 100,000 Series A Convertible Preferred Stock, in the aggregate, at a price per share of $0.60, for additional aggregate consideration of $60,000 with respect to the 2019 purchase and 45,000 Series A Convertible Preferred Stock, in the aggregate, at a price per share of $0.60, for additional aggregate consideration of $27,000 with respect to the 2020 purchase. |
| i) | Commencing February 2020, Ora Meir Soffer, CEO and chair of the board, is |
| j) | Commencing February 2020, Ilanit Halperin, director, and Ilan Ben-Ishay, director, are each entitled to a monthly fee of $3,500. |
| k) | See also Note 1 above. |
NOTE 7:6 – SUBSEQUENT EVENTS
| 1. | On April 1, 2020 the Company entered into a Convertible Note Purchase Agreement (the “CL Agreement”) with Citrine S A L Investment & Holdings Ltd, WealthStone Private Equity Ltd, WealthStone Holdings Ltd, Golden Holdings Neto Ltd, Beezz Home Technologies Ltd, Citrine Biotech 5 LP, Citrine High Tech 6 LP, Citrine High Tech 7 LP, Citrine 8 LP, Citrine 9 LP and Citrine Biotech 10 LP (together, the “Buyer”), all of which are affiliated with the Company. Under the CL Agreement, the Buyer agreed to purchase and the Company agreed to issue and sell, for up to an aggregate principal amount of $1,800 thousand, notes convertible into shares of common stock of the Company (the “Notes”), for a period starting on April 1, 2020 and ending upon the earlier of (i) 6 months thereafter and (ii) the consummation of a public offering by the Company. The CL Agreement provides that the Notes will bear an annual interest rate of six percent (6%) with respect to amounts paid that are used for working capital purposes of the Company, provided that amounts paid that are used for investment activities of the Company may be subject to different interest rates, that the conversion price per share of Common Stock shall equal 85% multiplied by the market price (as defined in the Notes), representing a discount of 15%, and that each Note will mature 18 months following the payment date. |
On October 6, 2019, Mrs. Osnat Philipp, the Chief Executive Officer of Novomic, andApril 19, 2020, the Company jointly agreedprovided a draw down notice under the CL Agreement for an amount of $170,000, which was paid to terminate her employment agreement. Mrs. Philipp continued providing her services to Novomic as required under Israeli law until October 30, 2019.. Mrs. Philipp’s resignation was not as a result of any disagreement or dispute with either the Company or Novomic.Company.
On October 22, 2019, Mrs. Tali Dinar, the Chief Financial Officer ofJune 12, 2020, the Company andprovided a draw down notice under the Company, jointly agreedCL Agreement for an amount of $1,000,000, which was paid to extend Mr. Dinar terminate notice period. Mrs. Dinar will continue to provide her services to the Company as required under Israeli law until December 22, 2019, unless otherwise agreed to by Mrs. Dinar and the Company.
On October 23, 2019, Novomic appointed Idan TraitsmanJune 12, 2020, the CL Agreement was amended to serve as the Chief Executive Officer of Novomic, effective immediately. In connection with Mr. Traitsman’s appointment,provide that for each draw down made by the Company agreedunder the CL Agreement, the Buyer shall be entitled to pay Mr. Traitsman a monthly salaryreceive two types of NIS 10,000 (approximately $2,800) plus VAT.
On November 17, 2019,warrants: A Warrants and B Warrants, with the Company entered into a form of securities purchase agreement with YMYA Warrants exercisable between 6 and TRF, relating to12 months after issuance for an offering of an aggregate of 3,000,000 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $87,000. In addition, the Company granted YMY and TRF an option, for a period of twelve months, to purchase up to an additional 145,000 Series A Convertible Preferred Stock, in the aggregate, at aexercise price per share equal to 1.25 times the average of $0.60,the closing prices of the 3 trading days preceding the draw down, and the B Warrants exercisable between 6 and 18 months after issuance for additional aggregate consideration of $87,000. The option was classified as a derivative financial liability and are re-measured each reporting date, with changes in fair value recognized in finance expense (income), net, since thean exercise price per share equal to 1.5 times the average of the warrants is denominated in USDclosing prices of the 3 trading days preceding the draw down, and that the number of each of the A Warrants and the functional currencyB Warrants issued will be equal to the draw down amount divided by the average of the Company isclosing prices of the NIS.3 trading days preceding the draw down, and that these amended terms will apply in respect of all draw downs, including drawdowns made prior to the date of the amendment.
| 2. | On May 14, 2020, the transaction referred to in Note 1 for the sale of 90% of the shares in Novomic to Traistman Radziejewski Fundacja Ltd. was completed. | |
| 3. | On May 26, 2020, the board of directors of the Company appointed Ms. Ilanit Halperin, CPA as Chief Financial Officer of the Company, replacing Mr. Zviel Gedalihou, effective from May 27, 2020. The board of directors also appointed Ms. Halperin as Chief Financial Officer of the Company’s wholly-owned Israel subsidiary, effective once it was incorporated. | |
| 4. | On June 3, 2020, the Company’s wholly-owned new Israeli subsidiary CTGL – Citrine Global Israel Ltd (company number 516201159) was incorporated. | |
| 5. | On May 31, 2020, the Company entered into a strategic partnership with Intelicanna Ltd., an Israeli medical cannabis company listed on the Tel Aviv Stock Exchange with ticker symbol INTL (“Intelicanna”), via a share exchange agreement and an agreement for future issuance of shares. The share exchange agreement provides that (i) the number of shares each party issues to the other will be calculated by dividing $500,000 by the volume weighted average price (VWAP) of the issuing party’s shares in the three trading days preceding the issuance, (ii) the issuance by Intelicanna will take place upon, and subject to, receipt of approval from the Tel Aviv Stock Exchange, and the issuance by the Company will follow immediately thereafter, and (iii) the parties may not sell the shares within the first six months after issuance, and thereafter the parties may sell the shares issued to them if the shares become registered through a prospectus approved by the relevant securities authority, or under an exemption provided by applicable securities law, subject to a limit on the number of shares either party may sell per day. The agreement for future issuance of shares provides that a fall in share price of a party, not exceeding 20%, measured after six months, will be offset by issuance of additional shares to the other party to bring up to $500,000 the total value of the shares issued to the other party. |
Furthermore, on June 25, 2020, the Company and its wholly owned Israeli subsidiary CTGL – Citrine Global Israel Ltd (“CTGL”) entered into services agreement with Intelicanna to provide business development and consulting services to Intelicanna, including assistance with raising financing (the “Services Agreement”) (references in this paragraph to the Company include CTGL). The terms of the Services Agreement include: (1) the Company will, for a period of 18 months, assist Intelicanna to raise up to NIS 15 million for Intelicanna’s working capital purposes, whether through issuance of convertible securities or any other means; all sums raised must be approved in advance by the Company, and in accordance with a business plan presented to the Company from time to time; the Company will have no obligation under the Services Agreement to invest in Intelicanna, and no liability if its efforts to source financing for Intelicanna do not bear fruit; (2) in the event Intelicanna raises funds through assistance from the Company, the Company will be entitled to (i) cash consideration equal to 5% of any amount raised, whether directly from the Company, or from any of its affiliates or any unrelated third party, and (ii) options to acquire a number of shares of Intelicanna equal to 5% of the amount raised divided by the Exercise Price; the “Exercise Price” will be the price per share at which the amount was raised, or if it was not raised through issuance of shares, the price per share at which Intelicanna last raised funds through issuance of shares; and (3) for one or more periods of at least 90 days, each time at Intelicanna’s request which the Company may accept or decline at its discretion, the Company will provide business development and strategy-building services, including: consulting on strategy and business plan; assistance defining financing needs; helping identify ways to develop potential sources of finance; and ongoing consulting support to Intelicanna’s management team and board. Intelicanna will pay the Company a fee of NIS 2,500 per day for the services. | ||
Also on June 25, 2020, to assist Intelicanna raise the first NIS 1 million towards the up to NIS 15 million mentioned in the Services Agreement, the Company and CTGL entered into an agreement to grant Intelicanna NIS 1 million in direct financing for working capital purposes. The financing will bear 6% annual interest and Intelicanna will make additional payments equaling 6% of its gross revenues between the date the financing is received and the date Intelicanna’s aggregate gross revenues thereafter equal NIS 2 million. If the total of the 6% interest plus the additional payments would result in a return of less than 12% in the year to the Company, the interest will 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 Company 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 its shares equal to NIS 1.5 million divided by the lower of (i) 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. Ilanit Halperin, a director and the Chief Financial Officer of the Registrant, is also the Chief Financial Officer of Intelicanna. |
| 6. | On June 22, 2020, the Company entered into a share purchase agreement with Nanomedic Technologies Ltd., an Israeli company (“Nanomedic”) as part of an A-1 funding round open only to existing Nanomedic shareholders and their affiliates. Nanomedic developed SpinCare™, a system that integrates electrospinning technology into a portable, bedside device, offering immediate wound and burn care treatment. The Company paid $450,000 for A-1 preferred shares of Nanomedic and also received warrants. The round raised approximately $2.2 million in total. Citrine S A L Investment & Holdings Ltd and certain of its partnerships, all affiliates of the Company, were already beneficial shareholders of Nanomedic immediately prior to the A-1 funding round, as was Ilan Ben-Ishay, a director of the Company. Ora Meir Soffer, chairperson and CEO of the Company, was already a director of both Nanomedic and its Israeli parent company Nicast Ltd., and was already a beneficial shareholder of Nanomedic. |
| 13 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTSForward-looking Statements
This Quarterly Report on Form 10-Q contains certain 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 created by such Act and laws. In some cases, you can identify forward-looking statements by terminology such as “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 factors that may cause actual results, performance levels of activity, or our achievements, or industry results to be materially different from those contemplated by the forward-looking statements. Such forward-looking statements appear in this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and may appear elsewhere in this Quarterly Report on Form 10-Q and include, but are not limited to, statements regarding the following:
Our business and operations are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report.
In addition, historic results of scientific research, clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest different conclusions. Also, historic results referred to in this periodic report would be interpreted differently in light of additional research, clinical and preclinical trials results. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that 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 described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, or the 2018 Annual Report.2019. Readers are also urged to carefully review and consider the various disclosures we have made in that report.
As usedOverview and Recent Developments
The Company’s new business activity was introduced immediately upon the change of control of the Company which occurred on February 27, 2020.
The Company’s new business activity comprises creating value and implementing expansion strategies for growth-stage technology companies. The Company believes the health, wellness, food tech and Israeli medical cannabis fields are demonstrating high growth potential, and is therefore primarily focused on these sectors. The Company aims to empower innovative companies to become global leaders and improve the health and quality of life of as many people as possible worldwide. The Company aims to support local and global expansion of such target companies via an array of services customized to each company’s needs, from assistance with strategic business planning to solving real estate-related and finance issues. The Company offers multistrategy solutions combining strategic marketing, business development, real estate and asset management services and financing solutions. By offering such a wide spectrum of services the Company aims to help create an integrated strategy that supports its target companies in this quarterly report,achieving their local and global expansion ambitions. The Company seeks to work proactively and collaboratively with the terms “we”, “us”, “our”,target companies in order to allow them to scale quickly and achieve their milestones. Further detail is provided in the “Company” and “TechCare” mean TechCare Corp. and our wholly owned subsidiary, Novomic Ltd., unless otherwise indicated or as otherwise required bynotes to the context.financial statements.
Overview and Recent Developments
We are a technology company engaged in the design, development and commercialization of a unique delivery platform utilizing vaporization of various natural compounds for multiple health, beauty and wellness applications. Our delivery platform is proprietary and patented.
Our current product offering includes Novokid® - an innovative home use device which vaporizes a natural, plant-based, pesticides, and silicone-free compound that effectively treats head lice and eggs. Following our soft launch of Novokid® in the Netherlands, we expanded our distribution network and launched Novokid in Israel during late May 2018 through Super Pharm, Israel’s largest and leading drugstore chain. The launch was accompanied by a radio and digital brand awareness and marketing campaign and supported by Meditrend, an Israeli distributor, specializing in health and wellness products while representing leading brands. On September 15, 2019, the Company terminated the agreement with its existing distributer and began selling the Novokid product directly to Super Pharm.
We believe that we will continue to experience losses and increased negative working capital and negative cash flows in the near future and will not be able to return to positive cash flow without either obtaining additional financing in the near term or completing a business transaction. Failure to obtain the necessary capital at acceptable terms, if at all, when needed, may force us to delay, limit, or terminate our product development efforts and adversely effect our ability to secure regulatory approvals and would adversely impact our planned research and development efforts in connection with our future products, which may make it more difficult for us to attain profitability.
Our Board of Directors is exploring strategic alternatives to enhance stockholder value, which may include future acquisitions, a merger with another company, a potential sale of certain assets, including Novomic, or the saleDescription of the Company as a public shell company.
InJanuary 2019, we entered into a joint venture agreement with a Chinese partner for the formation of a Chinese joint venture intended to focus on the development of comprehensive and broad range of health, wellness, beauty and home products for customers by utilizing our patented technology of vaporization of natural and plant-based compounds. The joint venture intends to sell its products in the Greater China region, including mainland China, Hong Kong, Macao, and Taiwan, directly or through others. We are currently working with our Chinese Partner on the formation of the Chinese joint venture entity.
On March 13, 2019, we issued and sold to ICB Biotechnology Investments Ltd. (“ICB”) 957,854 shares of our common stock for a price per share of $0.261, for aggregate consideration of $250 thousand. In accordance with the terms of the subscription agreement, upon the formation of a joint venture with China-Israel Biological Technology Co. Ltd., (“CIBD”) the parent company of ICB, and the transfer of the relevant intellectual property rights to the joint venture, we will issue and sell to ICB an additional 957,854 Shares for an additional investment amount of $250 thousand (the “Additional Investment”). In addition, subject to the consummation of the Additional Investment, we will grant ICB an option to purchase up to additional 833,333 shares of our common stock at a price per share of $0.60, for aggregate consideration of up to $1 million. To date, the Company has met all of the milestones required for the closing of the Additional Investment. Currently, there is no guarantee that the Company will be able to close on the Additional Investment.
On April 28, 2019, we entered into a form of securities purchase agreement with each of Y.M.Y. Industry Ltd. (“YMY”), Traistman Radziejewski Fundacja Ltd. (“TRF”) and Microdel Ltd. (“Microdel” and collectively, the “Investors”) relating to an offering of sale of an aggregate of 1,229,508 shares of our common stock at a purchase price of $0.183 per share for aggregate gross proceeds of approximately $225 thousand. In addition, we granted the Investors an option, for a period of twelve months, to purchase up to an additional 375,001 shares of common stock at a price per share of $0.60, for additional aggregate consideration of $225 thousand. The closing of the offering took place on April 29, 2019. The option was classified as a derivative financial liability and are re-measured each reporting date, with changes in fair value recognized in finance expense (income), net, since the exercise price of the warrants is denominated in USD and the functional currency of the Company is the NIS.
On August 20, 2019, we entered into an additional form of securities purchase agreement with YMY and TRF, relating to an offering of an aggregate of 8,275,862 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $240 thousand. In addition, the Company granted YMY and TRF an option, for a period of twelve months, to purchase additional 400,000 Series A Convertible Preferred Stock, in the aggregate, at a price per share of $0.60, for additional aggregate consideration of $240 thousand. The closing of the offering took place on August 29, 2019. The option was classified as a derivative financial liability and are re-measured each reporting date, with changes in fair value recognized in finance expense (income), net, since the exercise price of the warrants is denominated in USD and the functional currency of the Company is the NIS.
On November 17, 2019, we entered into a form of securities purchase agreement with YMY and TRF, relating to an offering of an aggregate of 3,000,000 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $87,000. In addition, the Company granted YMY and TRF an option, for a period of twelve months, to purchase up to an additional 145,000 Series A Convertible Preferred Stock, in the aggregate, at a price per share of $0.60, for additional aggregate consideration of $87,000.
Results of Operations during the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018New Business – Citrine Global, Corp.
Following the recent change of control over the Company, we started a new business. Our vision is to be a powerhouse for high-growth technology companies via our business and financial expertise. To better align our name with the new business, we decided to change the name of the Company to Citrine Global, Corp. We filed a Schedule 14(C) information statement in connection with the name change and expect the name change to take effect soon. On or about the same time, we expect to also start trading under a new ticker symbol. We will file a current report on Form 8-K once the new name and new ticker symbol become effective.
We are focused on creating value and implementing expansion strategies for growth-stage technology companies.
We aim to support local and global expansion of our client companies. We plan to bolster high-growth technology companies via an array of services, with the ability to customize them to each company’s needs - from assistance with strategic business planning to solving real estate-related and finance issues.
We offer multi-strategy solutions combining strategic marketing, business development, real estate and asset management services and financing solutions. Such wide spectrum of services is targeted at helping create an integrated strategy that supports our client companies in achieving their local and global expansion ambitions.
We seek to work proactively and collaboratively with our clients in order to allow them to scale quickly and achieve their milestones.
We believe the health, wellness and food tech fields are demonstrating high growth potential and are therefore primarily focused on these sectors. We plan on empowering innovative companies to become global leaders and improve the health and quality of life of as many people as possible worldwide.
Strategy
Multi-Strategy Solutions:
We offer a mix of business development services, asset and real estate support and financing solutions to help our client companies achieve their growth potential.
Potential client companies we review will receive financing after successful completion of due diligence and evaluation of legal, IP, financial, technological, business, equity/collateral secured loans, shares, sales, assets and real estate aspects in order to minimize risk.
The Company seeks to work proactively and collaboratively to achieve the best possible results. Through our offices and partners around the world, we believe we have the platform to achieve our goals. Our global network of partners and advisers has vast experience in working with start-ups and growth-stage companies helping them create strategic growth plans and present unique, strategic partnership options using a global professional network.
The Company’s partners and managers are all experienced investors and top-level managers that held high level positions in leading companies. They place at the Company’s disposal their network, experience and expertise and offer deep industry know-how in emerging technology markets, to achieve the growth goals and global success our client companies strive for.
The Company’s services range from assistance with strategic business planning to operational execution and financing, customized for the needs of each client company.
Business Development and Consulting:
Business development, creating synergistic partnerships, assisting managements build a strategy and set milestones, assist in finding M&A targets and in paving the way for a public offering.
We assist our client companies with:
●The Business – assisting the company management in building strategic analysis, business modelling, sales strategies, brand positioning, process development, and milestones for global success.
●Optimize Product Strategy - we bring marketing and industry experts to perfect product strategies.
●Ramp up Sales Force - having scaled businesses globally, our team assists in further sales ramp-up.
●Expand Globally - assisting the company management in building strategy and milestones for global success.
●Preparation for Investment - support with financial valuations, preliminary negotiations for investment, mergers, IPO and more.
●Local and International Networking - market development with the support of our partners and business network, we help our companies access international markets.
●The Board - provide board advisory support and assist in finding the right team.
●The Team - our extensive network allows us to find the right team and recruit top talent.
●Capital Raising - public and private capital raising.
●Public Capital - as a publicly traded company we help with solutions adapted to public trade.
●Streamline Operations - with a strong operational background, we assist in improving operations.
●Scale Infrastructure - we want our businesses to be references in terms of their infrastructure.
●Asset and Real Estate - provide solutions for companies’ real estate and assets to support their local and global expansion.
Real Estate:
Provide solutions for companies’ real estate-related needs, whether it is an office space, a lab or a greenhouse, we will assist the company in finding the right real estate at the right place and provide ongoing management services to these assets - all with the aim to enable our client companies to focus on the core aspects of their business and create value to their shareholders.
Financing:
Assist client companies in finding potential sources of financing for their businesses, whether by connecting them to third party investors or making an investment ourselves, or both.
Selection Criteria and Process:
Growth stage technology companies in the fields of healthcare and wellness with high growth potential.
Selection Criteria:
● The companies’ technology and IP
● The management team
● Financial model, market strategy and growth potential
● Addressable global market, competition and potential for international partnerships, mergers, and strategic investments
● Capability for providing collateral
● Substantial equity and revenue base
● Public companies – an advantage
The Company intends to initially focus on Israeli companies through its Israeli subsidiary CTGL - CITRINE GLOBAL ISRAEL LTD (company number 516201159) was incorporated on June 3.
Key Target Markets
We primarily target growth-stage technology companies focused on health and wellness solutions.
Health and Wellness Market – Overview:
The health and wellness industry is growing consistently and rapidly on a global scale, consisting of over 10% of the global GDP. Health and wellbeing tops consumer agendas creating addressable target markets of trillions of dollars.1 The digital health market is projected to reach over $500 billion at a CAGR of nearly 30% by 2025, the biotech market is expected to reach $775 billion by 2024, and the wellness market is estimated at $4,500 billion.2
The healthcare industry, and specifically the biotech sector, seeks to solve many of the world’s medical problems.
1https://www.who.int/health_financing/documents/health-expenditure-report-2019.pdf?ua=1; https://www2.deloitte.com/global/en/pages/life-sciences-and-healthcare/articles/global-health-care-sector-outlook.html;
2https://www.gminsights.com/industry-analysis/digital-health-market; https://globalwellnessinstitute.org/industry-research/2018-global-wellness-economy-monitor/; https://www.grandviewresearch.com/industry-analysis/corporate-wellness-market
The wellness industry is defined as products and solutions that enable people to incorporate wellness activities and lifestyles into their daily life.
The industry is divided into the following main categories:
● therapeutics
● pharmaceuticals
● biologics
● botanicals
Improvements in health technology and scientific breakthrough innovations are changing treatment paradigms towards directions of:
● preventative
● diagnostic
● holistic patient care
Democratized knowledge is driving demand for innovative health and wellness products and services across all demographics and geographies.
Changing consumer behavior and disruptive technologies are enabling the rapid consumerization and personalization of healthcare.
There is an evolution from prescription drugs, doctor-administered diagnostics and medical treatments to a new marketplace centered around the well-being of people as individuals not patients, enabling and improving ‘quality of life’ in ways which can be seamlessly integrated into their daily routines.
For these reasons we decided to place our focus on personalized health and wellness.
Many of these innovations are being driven by a new generation of venture-backed, more consumer-orientated companies, often underserved by the traditional medical and pharma VC marketplace. There are also pronounced market asymmetries between the sources of some of the most important wellness innovations in parts of Europe and Israel and the large consumer-driven marketplaces for these innovations globally.
Health and Wellness Markets - Fields:
Medical Food:
● Vitamins and minerals
● Nutritional supplements
● Food allergies
● Personalized nutrition and functional foods
● Digestion and gut health
● Weight management
● Cannabis edibles
● Plant based alternatives
● Neutronics and personalized nutrition
Medical Cannabis:
● Cannabis plant genetics
● Pharmacological cannabis effects
● Cannabis cultivation methods
● Cannabis-infused edibles
● Cannabis-based medications
● Cannabis products development
● Cannabis wellness solutions development
● Cannabis personalized medicine solutions
Physical and Mental Wellbeing:
● Cognitive/brain wellbeing
● Physical therapies
● Injury prevention
● Relaxation management and meditation
● Brain health and neurosciences
● Mood and stress detection and management
● Hypertension
● Anxiety and depression
Anti-Aging and Improved Longevity:
● Skin health/repair
● Bone/joint health
● Personalized fitness and physical mobility
● Lifestyle management
● Fatigue abatement
● Sleep quality
● Pain management
● Mental alertness and dementia abatement
Consumer/Digital Healthcare:
● Preventive and personalized fitness tracking
● Continuous health monitoring and biofeedback
● Point of care testing and screening devices
● Personalized big data and e-health analytics
● Unregulated or minimally regulated wearables, implants
● Post hospital/surgery monitoring
Health and Wellness Markets - Trends and Drivers:
● Health and wellness industry drivers/trends turned into investment opportunities.
● Deregulation of healthcare industry: devolution from hospitals-to-clinics-to-self.
● Technical innovation driving change: consumerization, digitization and democratization of wellbeing.
● Increased awareness of food and nutrition: new generation of functional and personalized foods.
● Cognitive health just as important as physical health: alternative remedies and improved awareness.
● Increased lifespan places huge demands on current systems: anti-aging, lifestyle management, quality of life.
● New consumers’ preferences and behavior: non-surgical, nonprescription, self-administered, self-testing.
● New business models and connected ways of making payments: insurance coverage includes more wellbeing.
● New regulations allowing cannabis infused medications, products and edibles.
Geographies
The Company opens opportunities with an insider’s entree into fast-growing industries with access to strategic investment opportunities. All this under a credible institutional quality platform.
● Israel is truly a ‘start-up nation’ and has global leaders in almost any category of technology-driven innovation covered by the Company.3
● Europe has very active health and wellness innovation clusters in the Netherlands, UK, France, Nordic regions and Germany in particular.
● North America: - the USA is the market leader in health and wellness innovations and leads the world in M&A activity in this area for mature companies with proven revenues.
In December 2019, a strain of novel coronavirus (COVID-19) causing respiratory illness emerged in the city of Wuhan in the Hubei province of China, and in January 2020, the World Health Organization declared the COVID-19 outbreak a public health emergency. The COVID-19 has spread to many countries and is impacting the markets globally. Many countries, states and municipalities have enacted quarantining regulations which severely limit the ability of people to move and travel, and require non-essential businesses and organizations to close their physical offices. The situation created by COVID-19 worldwide has made it difficult and even impossible to meet with different investors, parties and partners. The company managed to adapt to the situation and built an alternative plan in a short time. Since it was difficult and even impossible to travel specifically to New York and Europe, and since the company directors and executives are based in Israel, Citrine Global took the decision to focus on Israel as first step, via its fully-owned subsidiary CTGL - CITRINE GLOBAL ISRAEL LTD (company number 516201159) which was incorporated on June 3, 2020.
CGTL - Citrine Global Israel Ltd
CGTL - Citrine Global Israel targets Israeli startups and technology companies, and in particular public companies, in the fields of healthcare, wellness, foodtech and medical cannabis.
About Israel - the “Startup Nation”4:
● Israel has earned the nickname “Startup Nation” for a very good reason: with a population of around 8.5 million, it has the largest number of startups per capita in the world, around one startup per 1,400 people. This phenomenon has caught the eyes of companies with global reach and global aspirations.
● The hi-tech ecosystem in Israel is currently focusing its attention on research and development in the areas of healthcare and biotech, including solutions for COVID-19 and the medical cannabis plant for medical purposes.
● Israel is known for its academic research yielding world renown innovations and Nobel prize winners.
● In addition, the government recognizes the role of the high-tech industry as a main economic catalyst and supports innovations via funding and other models.
● Israel, as small as it may be, has attracted the interest of the world’s major technology companies, which have set up R&D centres in Israel.
3https://apex.aero/2019/05/22/startup-nation-israel-become-silicon-valley
4ibid.
CGTL - Citrine Global Israel Ltd – Strategy:
CGTL - Citrine Global Israel offers a unique, independent strategy that covers the whole spectrum of services and financing options to ensure the success of its chosen client companies, combining working capital financing, business escort, technological consulting services, real estate and infrastructure services for companies and a global network of experts and business contacts in the relevant fields.
CTGL - Citrine Global Israel Ltd – Professional Ecosystem:
CTGL - Citrine Global Israel has a team of serial entrepreneurs and leading business people and a network of top scientists, researchers and industry leaders, targeting to create an eco-system to promote its client companies towards success.
CTGL - Citrine Global Israel leverages the knowledge and experience of Citrine S A L High Tech and Citrine Biotech investment funds that have been operating for years in the Israeli start up market and have long term experience in investing in and promoting many startup companies.
CTGL - Citrine Global Israel also leverages the knowledge and experience of WealthStone Group, which specializes in real estate and hedge funds, and Neto Group, which specializes in insurance and financial planning consultancy.
CTGL - Citrine Global Israel Ltd - Target Market: Medical Foods:
The medical foods market covers fields including: vitamins and minerals; nutritional supplements; food allergies; personalized nutrition and functional foods; digestion and gut health; weight management; cannabis edibles; plant based alternatives; neutronics and personalized nutrition.
The global medical foods market is expected to be worth $30.4 billion by 2027, growing from $18.4 billion in 2019 at a CAGR of 6.3%.5
Medical food market drivers include:
● Rise in geriatric population
● Growing incidences of chronic diseases
● Increasing awareness regarding clinical nutrition amongst patients and healthcare professionals
In the past, meal replacements were mainly consumed by the elderly or the ill, frequently suffering from nutritional deficiencies. This has changed in recent years, with the marketing of meal replacements increasingly targeting healthy adults.
In addition, we see the emergence of cannabis-enhanced health edibles and drinks, that is expected to continuously grow by more than 250% by 2021.6
5https://www.grandviewresearch.com/industry-analysis/medical-foods-market
6https://www.grandviewresearch.com/industry-analysis/medical-foods-market; https://www.grandviewresearch.com/press-release/global-medical-foods-mark
CTGL - Citrine Global Israel Target Market: Regulated Medical Cannabis:
The medical cannabis market covers fields including: cannabis plant genetics; pharmacological cannabis effects; cannabis cultivation methods; cannabis-infused edibles; cannabis-based medications; cannabis products development; cannabis wellness solutions development; cannabis personalized medicine solutions.
Medical cannabis solutions have been approved for medical use in many countries and have been shown to benefit more than 40 serious medical conditions, including:
● Cancer
● Multiple sclerosis
● Parkinsons
● Epilepsy
● Chronic pain
● Post trauma
● Chronic digestive problems, Crohn’s Disease
● Anxiety and sleep disorders
● Concentration and memory problems
● Tourette Syndrome
Medical cannabis in Israel:
● The State of Israel is currently focusing its attention on research and development on the cannabis plant for medical purposes.
● Research into the cannabis plant began in Israel in the 1960s, when Prof. Rafael Meshulam first discovered the main components of the cannabis plant, a discovery that was a world breakthrough in the study of the plant at the time.
● Research into the cannabis plant in Israel has continued ever since, in academic and research institutions. In recent years, many studies have been conducted in the field of medical cannabis in Israel. Israel is considered a world center in the field of cannabis research and treatment.
● The cannabis plant is still not permitted for research in the USA, is still restricted under US federal law, and is only recently increasingly studied in European countries.
● As a result, Israel has an advantage in the field, relative to the rest of the world, and in academic knowledge on the medical potential of the cannabis plant in treating diseases such as cancer, epilepsy, and childhood autism.
● The world’s major drug companies have already begun to express an interest in Israeli research, as well as the big challenge involved in registering patents and intellectual property for drugs using the cannabis plant, which is a complex plant with hundreds of active ingredients.
● Around 100 cannabis–related startups are currently operating in Israel.
Medical Cannabis Global Market Size:
● In the world, there are over 40 countries that allow legal use of medical cannabis and the medical cannabis industry is also expanding to the wellness and medical foods sectors with cannabis incorporated into a variety of edibles, pills, spray products, transdermal patches, supplements, salves, ointments and lotions.
● Legal medical cannabis products sales grew 45.7% to $14.9 billion in 2019. This worldwide growth estimate reflects the highest annual growth rate to date. As a result of expected growth ArcView Group has updated their 2024 forecast to $42.7 billion in worldwide legal cannabis sales.7
● In addition, we see the emergence of the cannabis-enhanced health edibles and drinks market, that is expected to continuously grow by more than 250% by 2021.8
Asset and real estate services for the health and medical cannabis industry:
● The healthcare and medical cannabis industry creates attractive opportunities to invest in the industrial real estate sector with a focus on regulated medical-use cannabis facilities.
● Healthcare and medical cannabis companies specifically need infrastructure and assets that are licensed and guarded according to various regulations, involve long-term rentals, and more.
● Citrine has built a model adapted to these companies’ needs, covering innovation centers, laboratories, pharmacies, and clinics.
7https://www.grandviewresearch.com/industry-analysis/medical-foods-market
8https://www.grandviewresearch.com/industry-analysis/medical-foods-market; https://www.grandviewresearch.com/press-release/global-medical-foods-mark
The Company at this time intends to carry out its cannabis-related activity through its Israeli subsidiary only, and not the US parent company, and to be involved, and engage with client companies that are involved, in cannabis-related activities only in countries where the activity has been authorised under all appliable laws. The Company does not at this time intend to be involved, either directly or indirectly, in cannabis-related activity in the United States, in light of the federal-level restrictions in place at this time.
Citrine Global, Corp.’s primary shareholders
WealthStone Group
WealthStone Group specializes in alternative investments and operates in various fields with extensive financial knowledge and experience. WealthStone Group has real estate funds, hedge funds and technology investments funds and manages more than half a billion US dollars in investments in Israel.
Wealthstone introduces private investors to a world of investments which until now was reserved to an exclusive group, to allow investors to benefit from diversified alternative investments, with strong collateral and attractive returns.
Wealthstone has a variety of products with a wide range of investment periods, risk and security levels, so that each investor is matched with the most suitable investment.
The world of alternative investments is multi-faceted, with a wide range of investment opportunities that tend to be quite confusing for those who are unfamiliar with the field.
The management team and the funds’ GP partners specialize in each fund’s area, covering real estate, technologies, hedge funds and financing, and they are supported by top professional consultants in the respective fields, among them, appraisers, engineering companies, legal advisers, and other experts in each sector.
Wealthstone Real Estate:
Wealthstone Real Estate deals with financing and lending for projects in the real estate sector, urban renewal, removal-construction, and projects requiring equity and senior debt financing. It is one of the largest companies in Israel for financing renewal projects through limited partnerships in which it serves as a general partner. It is ranked by DUN’S 100 among the leading 100 companies in Israel’s real estate sector. DUN’S 100 is a professional, objective, and reliable guide based on fixed, defined, and measurable criteria according to various market sectors.
Citrine S A L technology investment funds
Citrine S A L technology investment funds is part of Wealthstone’s private equity activity for investments in the high-tech and biotech sectors.
Citrine S A L technology funds invest in high potential Israeli startup companies that own transformational technologies, leading a unique, independent investment strategy with a professional team and a global network of first-class partners and advisors.
Citrine S A L operates through limited partnerships, including Citrine S A L High Tech Ltd and Citrine S A L Biotech Ltd, offering a wide array of investment opportunities to private investors, for a range of investment periods.
The funds operate in various fields of technology investment including:
● Partnerships for investing in high-tech companies.
● Partnerships for investing in biotech companies.
● Partnerships for investing in companies designed for an IPO.
● Along with the financial investment, Citrine S A L provides assistance in building strategies, finding business partners, giving support in financial processes, mergers and acquisitions.
Citrine S AL funds have already invested in several promising Israeli companies including: Nicast, NanoMedic, WellBe, Biocep, Improdia, Intelicanna, IBOT, Cannbit, Novomic, Dario, BSP Medical, ICB Israel-China Fund and more.
The Citrine S A L - ICB Israel-China Fund partnership targets strategic international and Chinese partners interested in investment and commercial cooperation with technology companies. The collaboration covers investment in medical and biomedical companies in order to bring them to China as part of joint ventures.
Additionally, Citrine has models and investments in partnerships that are designed for institutional investors, foreign investors and designated investment groups.
Neto Financial Planning
Neto Financial Planning was founded over 27 years ago and is one of the largest companies in the Israeli private and business financial planning and insurance industry.
Neto has thousands of loyal customers, which it has been accompanying for many years, providing financial advisory services in respects of products with a market worth of over $3 billion.
Neto Financial Planning (Neto) is Israel’s largest financial planning private company. DUN’S 100 has ranked Neto among the leading 100 companies in Israel’s financial planning sector each year since 2018. Neto is the only Israeli broker included in the DUN’S 100 rankings. Neto provides holistic (comprehensive) financial planning for thousands of clients across Israel, through a network which includes financial planners who are licensed pension advisors and an administrative and professional support team.
Neto’s significant scale and experience enable its clients to benefit from a wide variety of investment opportunities, income tax planning and reduction, handling retirees, wills, medical committees, loans, mortgages, review and analysis of their insurance files, elementary insurance, lower costs and access to current and comprehensive knowledge and technologies, in the management of their entire financial lives.
Neto financial planning encompasses the full range of financial needs of every household in Israel including Neto - Financial Planning, Neto - Financial Protection, Neto - Savings and Investment Portfolios for Retirement Planning and Neto -Alternative Investments.
Neto - Alternative Investments: Neto offers its clients a variety of alternative investments that are not directly sensitive to capital markets swings in Israel and globally. The operations in this area are conducted through Wealthstone group (which is owned 50% by Neto), which serves as Neto’s alternative investments arm.
Results of Operations
Revenues
During the three and nine months ended September 30, 2019, weWe generated $36 and $121 thousand in revenues, compared to $90 and $189$11 thousand in revenues in the three and nine months ended September 30, 2018.March 31, 2020 compared to $58 thousand in revenues in the three months ended March 31, 2019. The decrease is mainly attributable to a decrease in the sales ofdemand for Novomic products and our products.failure to obtain FDA approval for Novomic products or enter into additional engagements with distributers, and also to us focusing on our new business activity.
Gross Profit
OurWe incurred a gross profit (loss)loss during the three and nine months ended September 30, 2019, were $3 and $(30)March 31, 2020, of $2 thousand, compared to $19 and $60$4 thousand in the three and nine months ended September 30, 2018.March 31, 2019. The decrease is mainly attributable to decrease in the sales volume and a decrease in inventory value.value of Novomic products.
Research and Development Expenses
Our research and development expenses during the three and nine months ended September 30, 2019March 31, 2020 were $34$18 thousand and $115as compared to $41 thousand, and all expenses resulted from ongoing research and development expenses.
Our research and development expenses during the three and nine months ended September 30, 2018 were $143 thousand and $191 thousand.March 31, 2019. The decrease is mainly attributable to decrease in expenses related to the lice product.Novomic products as a result of the conclusion of our board of directors that the Company would not be able to successfully commercialize the Novomic products.
Marketing, General and Administrative Expenses
Our marketing, general and administrative expenses during the three and nine months ended September 30, 2019March 31, 2020 were $365$672 thousand and $1,177as compare to $435 thousand and were comprised mainly of $819 thousand in payroll and payments to consultants for the nine months ended September 30, 2019. Our marketing, general and administrative expenses during the three and nine months ended September 30, 2018 were $523 thousand and $1,490 thousand and were comprised mainly of $881 thousand in payroll and payments to consultants and professional services for the nine months ended September 30, 2018.March 31, 2019 The decreaseincrease in our marketing, general and administrative expenses is mainly attributable to the increase in our share based compensation expenses somewhat offset by a decrease in marketing expenses and professional services.services as a result of the conclusion of our board of directors that the Company would not be able to successfully commercialize the Novomic products.
Net Loss
During the three and nine months ended September 30,March 31, 2020 we incurred a net loss of $689 thousand. During the three months ended March 31, 2019, we incurred a net loss of $406 thousand and $1,342 thousand. During the three and nine months ended September 30, 2018, we incurred a net loss of $656 thousand and $1,515$479 thousand. The decreaseincrease in net loss is mainly attributable to a decrease in operating expenses.the share based compensation expenses as described above.
Liquidity and Capital Resources
Our balance sheet as of September 30, 2019March 31, 2020 reflects total assets of $666$4,543 thousand, consisting mainly of cash and cash equivalents in the amount of approximately $126$14 thousand, inventory of approximately $198$27 thousand, prepaid share based payment and other current assets of approximately $4,331 thousand and property and equipment net, of approximately $156$139 thousand. As of December 31, 2018,2019, our balance sheet reflects total assets of approximately $1,131$257 thousand consisting mainly of cash and cash equivalents in the amount of approximately $475$18 thousand, inventory in the amount of approximately $249$35 thousand, other receivables of approximately $177$19 thousand and property and equipment net, of approximately $161$156 thousand.
As of September 30,March 31, 2020, we had total current liabilities of approximately $478 thousand, consisting mainly of note payable of approximately $266 thousand and accounts payable and accrued expenses of approximately $205 thousand. As of December 31, 2019, we had total current liabilities of approximately $270$260 thousand consisting mainly of accounts payable and accrued expenses of approximately $164$224 thousand and a note payable of approximately $80 thousand. As of December 31, 2018, we had total current liabilities of approximately $385 thousand consisting mainly of accounts payable and accrued expenses of approximately $231 thousand and a note payable of approximately $80$123 thousand.
As of September 30, 2019,March 31, 2020, we had positive working capital of approximately $104$3,098 thousand, compared to positivenegative working capital of approximately $573$278 thousand at December 31, 2018. 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.2019. Our total liabilities as of September 30, 2019March 31, 2020 were approximately $354$484 thousand, compared to approximately $390$368 thousand at December 31, 2018.
2019.
During the ninethree months ended September 30, 2019,March 31, 2020, we used approximately $1,035 thousands of cash in our operating activities. This resulted mainly from an overall net loss of approximately $1,342 thousand, a decrease in other receivables of approximately $169 thousand and a decrease in inventory of approximately $68 thousand. During the nine months ended September 30, 2018, we used approximately $1,779$216 thousand of cash in our operating activities. This resulted mainly from an overall net loss of approximately $1,515$219 thousand, an increase in stock-based compensation of approximately $506 thousand, an increase in other receivables of approximately $479 thousand and an increase in accounts payable and accrued expenses of approximately $151$46 thousand. During the three months ended March 31, 2019, we used approximately $320 thousand andof cash in our operating activities. This resulted mainly from an overall net loss of approximately $479 thousand, management fee waiver of approximately $90, an increase in inventoryaccounts payable and accrued expenses of approximately $121$51 thousand and a decrease in other receivables of approximately $101 thousand.
During the ninethree months ended September 30, 2019,March 31, 2020, we used approximately $3 thousanddid not use any amounts in our investing activities, as compared to approximately $59$11 thousand in the same period in the prior year.
DuringThe Company has a history of accumulated losses and its development and execution of its strategy is still uncertain. However, based on the nine months ended September 30, 2019, our financing activities provided us with $697 thousand, as compared to $1,622 thousandCompany’s current cash balances, capital raised in the same periodsecond quarter of 2020 and the irrevocable letter it has received (as noted above), the Company has sufficient funds for its plans for continuing its new activity in the prior year, throughnext twelve months from the issuance of common stock.
On March 13, 2019, we issued and sold to ICB 957,854 shares of our common stock at a price per share of $0.261, for aggregate consideration of $250 thousand. In April 2019, the Company entered into subscription agreements with several investors, consisting of our officers and directors, pursuant to which we issued 1,229,508 shares of common stock for aggregate consideration of $225 thousand. The Company recorded derivative liability in its books. In addition, in August 2019, the Company entered into subscription agreements with several investors, consisting of our officers and directors, pursuant to which we issued 8,275,862 newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $240 thousand. The Company recorded derivative liability in its books.
On April 28, 2019, we entered into a form of securities purchase agreement with the Investors relating to an offering of sale of an aggregate of 1,229,508 shares of our common stock at a purchase price of $0.183 per share for aggregate gross proceeds of approximately $225 thousand. In addition, we granted the Investors an option, for a period of twelve months, to purchase up to an additional 375,001 shares of common stock at a price per share of $0.60, for additional aggregate consideration of $225 thousand. The closing of the offering took place on April 29, 2019.
On August 20, 2019, we entered into an additional form of securities purchase agreement with YMY and TRF, relating to an offering of an aggregate of 8,275,862 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $240 thousand. In addition, the Company granted YMY and TRF an option, for a period of twelve months, to purchase additional 400,000 Series A Convertible Preferred Stock, in the aggregate, at a price per share of $0.60, for additional aggregate consideration of $240 thousand. The closing of the offering took place on August 29, 2019.
On November 17, 2019, we entered into a form of securities purchase agreement with YMY and TRF, relating to an offering of an aggregate of 3,000,000 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $87,000. In addition, the Company granted YMY and TRF an option, for a period of twelve months, to purchase up to an additional 145,000 Series A Convertible Preferred Stock, in the aggregate, at a price per share of $0.60, for additional aggregate consideration of $87,000.this Form 10Q.
While management believes the Company 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.Off-Balance Sheet Arrangements In addition, our Board of Directors is exploring strategic alternatives to enhance stockholder value, which may include future acquisitions, a merger with another company, a potential sale of certain assets, including Novomic, or the sale of the Company as a public shell company.
Going Concern Consideration
As a 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
Please see Note 1B of Part I, Item I of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, reference is made to Note 1B in the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018 (filed on March 28, 2019) with respect to our Critical Accounting Policies.
All other material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2018 are recorded in Note 1b of this quarterly report
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.Because it is a smaller reporting company, the Company is not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure 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 Chairman of the Board of Directors (who is the Company’s principal executive officer)officer and the Company’s Chief Financial Officer (CFO) (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 the Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Management’s Remediation Plan
Based on ourthe Company’s evaluation of the effectiveness of ourits disclosure controls and procedures as of September 30, 2019, ourMarch 31, 2020, the Company’s Chairmanprincipal executive officer and CFOthe Company’s principal financial officer concluded that the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 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 ourthe Company’s management, including our Chairmanits Chair and CFO, to allow timely decisions regarding required disclosure.
Management’s Remediation PlanBased on this evaluation, the Company’s management concluded that its internal control over financial reporting was not effective as of March 31, 2020 as it identified control deficiencies that constituted material weaknesses in the Company’s internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified in the Company’s internal control over financial reporting are described below:
Since the time our initial material weaknesses were identified in early 2017 relating to (i) inadequateInadequate segregation of duties consistent with control objectives; and
(ii) ineffectiveIneffective controls over period-end financial reporting and disclosure processes, we have initiated the following procedures during the year ended December 31, 2017:processes.
We also plan to implement additional steps as follows: (i) appoint qualified personnel to address inadequate segregationA material weakness is a deficiency, or a combination of duties and ineffective controlsdeficiencies, in internal control over period-end financial reporting, as well as continue implementing modifications to our operating procedures andsuch that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial controls to address such inadequacies; and (ii) adopt sufficient written policies and procedures for period-end financial reporting.statements will not be prevented or detected on a timely basis.
The remediation efforts, which are not completedCompany’s management will continue to monitor and evaluate the effectiveness of its internal control over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary.
Management believes that despite the material weaknesses set forth above, the Company’s consolidated financial statements as of September 30, 2019,and for the three month period ended March 31, 2020 are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessfulfairly stated, in securing such funds, remediation efforts may be adversely affectedall material respects, in a material manner.accordance with US GAAP.
Changes in Internal Control over Financial Reporting
During the ninethree months ended September 30, 2019,March 31, 2020, 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.
On November 14, 2019, Zvi Yemini voluntarily resigned from his position as Chief Executive Officer and as a member of the Board of Directors of the Company and of Novomic. Mr. Yemini did not resign as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
On November 17, 2019, we entered into a form of securities purchase agreement with YMY and TRF, relating to an offering of an aggregate of 3,009,000 shares of the Company’s newly designated Series A Convertible Preferred Stock at a purchase price of $0.029 per share for aggregate gross proceeds of approximately $87,000. In addition, the Company granted YMY and TRF an option, for a period of twelve months, to purchase up to an additional 145,000 Series A Convertible Preferred Stock, in the aggregate, at a price per share of $0.60, for additional aggregate consideration of $87,000.
(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 | |
| 31.1* | Rule 13a-14(a) Certification of Chief Executive Officer. | |
| 31.2* | Rule 13a-14(a) Certification of Chief Financial Officer. | |
| 32.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. | |
| 32.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. | |
| 101.1* | The following materials from our Quarterly Report on Form 10-Q for the quarter ended |
* 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.
| TechCare Corp. | ||
| By: | /s/ | |
| (Principal Executive Officer) | ||
| Date: | ||
| By: | /s/ | |
| Chief Financial Officer and Director | ||
| (Principal Financial and Principal Accounting Officer) | ||
| Date: | ||
| 28 |