CITRINE GLOBAL, CORP. - Quarter Report: 2019 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2019

or

For the transition period from ________________ to ________________

Commission file number: 000-55680

TECHCARE CORP.
(Exact Name Of Registrant As Specified In Its Charter)

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, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 May 13, 2019, the registrant had 34,169,890 shares of common stock outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TechCare Corp.

Condensed Consolidated Balance Sheets

As of March 31, 2019 and December 31, 2018

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TechCare Corp.

Condensed Consolidated Statements of Operations and Comprehensive loss

For the Three-Month Periods ended March 31, 2019 and 2018

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TechCare Corp.

Condensed Consolidated Statements of Cash Flows

For the Three-Month Periods ended March 31, 2019 and 2018

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TechCare Corp.

Notes to Unaudited Financial Statements

March 31, 2019 (Unaudited)

NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Nature of operations

TechCare Corp. (“Techcare” or the “Company”) 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, the Company signed a Merger Agreement with 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 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 development 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 March 31, 2019, the Company had a total comprehensive loss of $0.47 million and had incurred $0.3 million loss from operating cash flow. As of March 31, 2019, the Company incurred accumulated losses of approximately $9.2 million. Based on the projected cash flows and Company’s cash balance as of March 31, 2019, the Company’s management is of the opinion that without further fund raising it will not have sufficient resources to enable it to continue advancing its activities including the development, manufacturing and marketing of its products for a period of at least 12 months from the date of issuance of these financial statements. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans include the continued commercialization of 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. Following the balance sheet date, the Company raised an additional $225,000 in capital. There are no assurances however, that the Company will be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in commercializing its products and securing sufficient financing, it may need to reduce activities, or curtail or cease operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

TechCare Corp.

Notes to Unaudited Financial Statements

March 31, 2019 (Unaudited)

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 three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year or for other interim periods or for future years. The consolidated balance sheet as of December 31, 2017 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.

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 March 2019 and 2018, no impairment was recorded.

TechCare Corp.

Notes to Unaudited Financial Statements

March 31, 2019 (Unaudited)

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.

NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted in Current Period

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-02 “Leases.” The guidance establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The guidance became effective on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. The adoption of this standard did not have a material effect on the Company’s 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 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 does not have a material impact on the Company’s consolidated statements of income and consolidated statements of cash flows.

TechCare Corp.

Notes to Unaudited Financial Statements

March 31, 2019 (Unaudited)

NOTE 3: STOCKHOLDERS’ EQUITY

On March 13, 2019, we issued and sold to ICB Biotechnology Investments Ltd. (“ICB”) 957,854 of common stock at a price per share of $0.261, for aggregate consideration of $250,000.

NOTE 4: INCOME TAXES

a. Basis of taxation

The Company and its subsidiary are taxed under the domestic tax laws of the jurisdiction of incorporation of each entity (United States and Israel).

b. Carryforward Tax Losses

Carryforward Tax Losses of the Company as of March 31, 2019 amounted to approximately $0.39 million. Carryforward Tax Losses of Novomic amounted to approximately $6 million. 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 March 31, 2019.

NOTE 5: LOSS PER SHARE

Loss per share is based on the loss that is attributed to the aggregate number of outstanding shares of common stock, divided by the weighted average number of common stock in issue during the period.

NOTE 6: FAIR VALUE OF FINANCIAL INSTRUMENTS

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 reconciliation of the change for the financial liability where fair value measurement is estimated utilizing Level 3 inputs:

TechCare Corp.

Notes to Unaudited Financial Statements

March 31, 2019 (Unaudited)

NOTE 7: RELATED PARTY TRANSACTIONS

a. On May 31, 2015, the Company entered into a consulting agreement with Mr. Yossef De-Levy, a member of the Company’s Board. Pursuant to the consulting agreement, Mr. De-Levy receives a gross monthly amount of NIS 10,000 (approximately $2,900). The foregoing payment is in addition to, and independent of, the fee that Mr. De-Levy is entitled to receive for continued services as a member of the Board. In March 2019 and April 2019, the Company entered into amendments to the consulting agreement, pursuant to which the monthly retainer was waived commencing on November 15, 2018 through August 31, 2019.

b. On December 31, 2015, the Company entered into a consulting agreement with Zvi Yemini, the Company’s Chairman of the Board and with his affiliated entity Y.M.Y Industry Ltd. (“YMY”). Pursuant to the consulting agreement, Mr. Yemini received a gross monthly amount of NIS 24,000 (approximately $6,200). The foregoing payment is in addition to, and independent of, the fee that Mr. Yemini is entitled to receive for continued services as a member of the Board. On February 22, 2017, the Company signed an amendment to the original agreement with Mr. Yemini and YMY. Pursuant to the amendment, Mr. Yemini’s monthly payment was increased to NIS 45,000 (approximately $13,000) starting February 2017. In March 2019 and April 2019, the Company entered into amendments to the consulting agreement, pursuant to which the monthly retainer was waived commencing on November 15, 2018 through August 31, 2019.

c. On July 31, 2016, the Company entered into a consulting agreement with Mr. Oren Traistman, a member of the Board. Pursuant to the consulting agreement, Mr. Traistman receives a gross monthly amount of NIS 10,000 (approximately $2,900). In March 2019 and April 2019, the Company entered into an amendment to the consulting agreement, pursuant to which the monthly retainer was waived commencing on November 15, 2018 through August 31, 2019.

d. 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 receives a gross monthly amount of $2,000. In March 2019 and April 2019, the Company entered into an amendment to the consulting agreement, pursuant to which the monthly retainer was waived commencing on November 15, 2018 through August 31, 2019.

NOTE 8: SUBSEQUENT EVENTS

In April 2019, the Company purchased 100 ordinary shares of Novomic, its wholly owned subsidiary, for aggregate consideration of NIS 8,093,543 (approximately $2,250,000).

On April 28, 2019, the Company entered into a form of Securities Purchase Agreement (the “Securities Purchase Agreement”) with each of Y.M.Y. Industry Ltd., Traistman Radziejewski Fundacja Ltd. and Microdel Ltd. 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 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 $225,000. The closing of the offering took place on April 29, 2019.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD-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. Readers are also urged to carefully review and consider the various disclosures we have made in that report.

As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “TechCare” mean TechCare Corp. and our wholly owned subsidiary, Novomic Ltd., unless otherwise indicated or as otherwise required by the context.

The following financial data in this narrative are expressed in thousands, except for share and share data or as otherwise noted.

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, our Israeli distributor, specializing in health and wellness products while representing leading brands.

We intend to expand our sales points in Israel and began selling our products in additional pharmacies and various online outlets during 2019. As we remain focused on increasing our global footprint and expanding our distribution network, we showcased Novokid® and met potential distributors and partners at CPhI Worldwide, a renowned and leading pharma tradeshow held in Madrid during October 2018. Accordingly, we are exploring various opportunities to sign agreements with distributors in Europe during the fiscal year ending December 31, 2019. We are also working on erecting an automated production line which is expected to ramp up our manufacturing capacity while reducing its costs.

We believe that we will need to raise up to $2,000 thousand during the year ending December 31, 2019 in order to successfully implement our business plan, of which there can be no assurance. 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 Treatment Solutions

Novokid® – Natural, Plant-based and Effective Lice Treatment

Parents and children exposed to head lice are now forced to use standard over-the-counter, or OTC, treatments that are toxic, often ineffective, time consuming and expensive. According to the Journal of Medical Entomology, 98% of lice have developed resistance to existing treatments in the US and they are now referred to as “super-lice”. Most current treatments contain pesticides, alcohol or silicone, which are all associated with a wide variety of hazardous side effects.

Novokid® is a non-pesticide, natural, plant-based and eco-friendly solution that eliminates lice and super lice with a 10 minute dry treatment. This compares with current treatments that require 20-40 minutes of shampooing and combing. Our treatment is fast, dry, clean, and easily administered at home or on the go. Novokid® can also be used as a maintenance treatment if used regularly.

Shine – Natural Haircare rejuvenation

Shine uses a patented vaporization process and formulation to clean, treat and improve the appearance of the hair and scalp. In addition to removing the residue, the treatments balance the hair’s pH levels, add body and shine, define curls, and strengthen and protect hair from further damage. We believe that the Shine treatment is user friendly, requiring the user to connect the Using Shine capsule to a designated tube, place the attached cap on their head and sit for a 10-minute treatment. There is no need to rinse or shampoo following the treatment. The treatment is expected to cleanse the scalp and leave the hair shiny and manageable.

Recent Developments and Plans

Our current and future products are all based on the vaporization platform, which was developed over a period of seven years. Since January 1, 2018, we have achieved the following:

During the next 12-18 months, we plan to focus our efforts on the following:

Novokid®:

Shine:

Other:

We may be required to obtain additional regulatory approvals for our head lice treatment platform and any future products. If unable to receive regulatory approval or commercialize our product candidates, our business will be adversely affected. CE approval, which was already obtained for our Novokid® product, is required for the marketing, distributing and sale of our products in the European Union, whereas FDA approval is required for such marketing, distributing and sale in the United States. In the event that our products are to be sold in certain territories requiring additional regulatory approvals, such approvals will need to be obtained by us or by our distributors.

In addition, in January 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 for a price per Share of $0.261, for aggregate consideration of $250,000. 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 $250,000 (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 $1,000,000.

On April 28, 2019, we entered into a form of Securities Purchase Agreement (the “Securities Purchase Agreement”) with each of Y.M.Y. Industry Ltd., Traistman Radziejewski Fundacja Ltd. and Microdel Ltd. relating to an offering 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 $225,000. 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 $225,000. The closing of the offering took place on April 29, 2019.

Results of Operations during the three months ended March 31, 2019 as compared to the three months ended March 31, 2018

Revenues

During the three months ended March 31, 2019, we generated $58 thousand in revenues, compared to $27 thousand in revenues in the three months ended March 31, 2018. The increase is mainly attributable to an increase in the sale of for our product.

Research and Development Expenses

Our research and development expenses during the three months ended March 31, 2019 were $41 thousand and all expenses resulted from ongoing research and development expenses.

Our research and development expenses during the three months ended March 31, 2018 were $31 thousand. The increase is mainly attributable to expenses related to the new expected Shine product.

Marketing, General and Administrative Expenses

Our marketing, general and administrative expenses during the three months ended March 31, 2019 were $436 thousand and were comprised mainly of $320 thousand in payroll and payments to consultants. Our marketing, general and administrative expenses during the three months ended March 31, 2018 were $464 thousand and were comprised mainly of $286 thousand in payroll and payments to consultants. The decrease in our marketing, general and administrative expenses is mainly attributable to a decrease in marketing expenses and travel abroad expenses.

Net Loss

During the three months ended March 31, 2019 we incurred a net loss of $479 thousand. During the three months ended March 31, 2018, we incurred a net loss of $364 thousand. The increase in net loss is mainly attributable to a decrease in gross margins.

Liquidity and Capital Resources

Our balance sheet as of March 31, 2019 reflects total assets of $1,053 thousand, consisting mainly of cash and cash equivalents in the amount of approximately $371 thousand, inventory of approximately $224 thousand and property and equipment, net of approximately $163 thousand. As of December 31, 2018, our balance sheet reflects total assets of approximately $1,158 thousand consisting mainly of cash and cash equivalents in the amount of approximately $475 thousand, inventory in the amount of approximately $249 thousand, other receivables of approximately $177 thousand and property and equipment net, of approximately $161 thousand.

As of March 31, 2019, we had total current liabilities of approximately $337 thousand, consisting mainly of accounts payable and accrued expenses of approximately $187 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 thousand.

As of March 31, 2019, we had positive working capital of approximately $386 thousand, compared to positive working capital of approximately $573 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. Our total liabilities as of March 31, 2019 were approximately $460 thousand, compared to approximately $417 thousand at December 31, 2018.

During the three months ended March 31, 2019, we used approximately $320 thousand of cash in our operating activities. This resulted mainly from an overall net loss of approximately $479 thousand, a decrease in other receivables of approximately $101 thousand and a decrease in inventory of approximately $32 thousand. During the three months ended March 31, 2018, we used approximately $540 thousand of cash in our operating activities. This resulted mainly from an overall net loss of approximately $364 thousand, an increase in accounts payable and accrued expenses of approximately $39 thousand and an increase in inventory of approximately $43 thousand.

During the three months ended March 31, 2019, we used approximately $11 thousand in our investing activities, as compared to approximately $1 thousand in the same period in the prior year.

During the three months ended March 31, 2019, our financing activities provided us with $232 thousand, as compared to $900 thousand in the same period in the prior year, through 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 $250,000. In addition, 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 $225,000.

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.

Going Concern Consideration

As result of the above, there is substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures with respect to this matter, but no accounting adjustments that relate to this matter.

Off-Balance Sheet Arrangements

We have 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. There have been no 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer (CEO) (who is the Company’s principal executive officer) and the Company’s Chief Financial Officer (CFO) (who is the Company’s principal financial 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. Based on our evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2018, our Company’s CEO and CFO 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 our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

Management’s Remediation Plan

Since the time our initial material weaknesses were identified in early 2017 relating to (i) inadequate segregation of duties consistent with control objectives; and (ii) ineffective controls over period-end financial reporting and disclosure processes, we have initiated the following procedures during the year ended December 31, 2017:

We also plan to implement additional steps as follows: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective controls over period-end financial reporting as well as continue implementing modifications to our operating procedures and financial controls to address such inadequacies; and (ii) adopt sufficient written policies and procedures for period-end financial reporting.

The remediation efforts, which are not completed as of March 31, 2019, are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2019, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

(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.

* Filed herewith
** Furnished herewith

SIGNATURES

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.