GlucoTrack, Inc. - Quarter Report: 2014 March (Form 10-Q)

zk1414894.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2014

or

o	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: 000-54785

INTEGRITY APPLICATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware		98-0668934
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

102 Ha’Avoda Street P.O. Box 432 Ashkelon, Israel		L3 7810301
(Address of principal executive offices)		(Zip Code)

972 (8) 675-7878

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of May 13, 2014, 5,304,072 shares of the Company’s common stock, par value $0.001 per share, were outstanding.

INTEGRITY APPLICATIONS, INC.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Consolidated Balance Sheets		3
Consolidated Statements of Operations and Comprehensive Loss		4
Statements of Changes in Stockholders’ Equity (Deficit)		5
Consolidated Statements of Cash Flows		12
Notes to Consolidated Financial Statements		14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II - OTHER INFORMATION		24
Item 6.	Exhibits	24
SIGNATURES		25
EXHIBIT INDEX		26

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Consolidated Balance Sheets

	US dollars (except share data)
	March 31, 2014			December 31, 2013
	March 31, 2014			December 31, 2013
	(unaudited)			(audited)
A S S E T S
Current Assets
Cash and cash equivalents		1,617,121			2,385,911
Other current assets		88,488			93,052
Total current assets		1,705,609			2,478,963

Property and Equipment, Net		107,477			107,209

Funds in Respect of Employee Rights Upon Retirement		169,252			170,033
Total assets		1,982,338			2,756,205
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Credit from banking institutions		23,838			-
Accounts payable		135,561			49,787
Other current liabilities		346,520			261,120
Total current liabilities		505,919			310,907

Long-Term Liabilities
Long-term loans from stockholders		685,186			693,092
Liability for employee rights upon retirement		234,991			236,074
Warrants with down-round protection		8,070,835			8,216,705
Total long-term liabilities		8,991,012			9,145,871
Total liabilities		9,496,931			9,456,778

Commitments and Contingent Liabilities
Temporary Equity
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock"):
10,000,000 shares authorized as of March 31, 2014 and December 31, 2013, respectively; issued and outstanding 7,407 shares as of March 31, 2014 and 7,417 shares as of December 31, 2013		4,356,657			4,362,545
Stockholders' Deficit
Common Stock of $ 0.001 par value ("Common Stock"):
40,000,000 shares authorized as of March 31, 2014 and December 31, 2013; issued and outstanding 5,304,072 shares and 5,301,693 shares as of March 31, 2014 and December 31, 2013, respectively		5,305			5,302
Additional paid in capital		14,552,654			14,532,068
Accumulated other comprehensive income		53,574			52,702
Deficit accumulated during the development stage		(26,482,783	)		(25,653,190	)
Total stockholders' deficit		(11,871,250	)		(11,063,118	)
Total liabilities, temporary equity and stockholders’ deficit		1,982,338			2,756,205

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Consolidated Statements of Operations and Comprehensive Loss

	US dollars
	Three month period ended March 31,					Cumulative period from September 30, 2001 (date of inception) through March 31,
	2014			2013		2014 (*)
	(unaudited)					(unaudited)
Research and development expenses, net		451,084			504,245		12,914,242
Selling, marketing and general and administrative expenses		436,102			183,579		4,491,884
Other income		-			-		(912	)
Operating loss		887,186			687,824		17,405,214
Financing (income) expenses, net (**)		(150,267	)		655,771		8,418,384
Loss for the period		736,919			1,343,595		25,823,598
Other comprehensive (income) loss:
Foreign currency translation adjustment		872			6,353		53,574

Comprehensive loss for the period		737,791			1,349,948		25,877,171

Loss per share (Basic and Diluted)		0.16			0.25

Weighted average number of shares outstanding (Basic and Diluted) (Note 3)		5,302,980			5,427,589

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

(**)	Includes ($145,870) relating to changes in the fair value estimate of the warrants with down-round protection and $611,060 of issuance costs allocated to the warrants with down-round protection, for the three month period ended March 31, 2014 and March 31, 2013, respectively.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Statements of Changes in Stockholders’ Equity (Deficit) (*)

	US dollars (except share data)
	Common Stock						Accumulated			Deficit			Total
	Number of shares		Amount		Additional paid in capital		other comprehensive income (loss)			accumulated during development stage			stockholders’ equity (deficit)
September 30, 2001 (date of inception)
2,136,307 shares of Common Stock of par value $0.001 per share issued for cash		2,136,307		2,136		38,306		-			-			40,442

Loss for the period		-		-		-		-			(63,293	)		(63,293	)
Other comprehensive loss		-		-		-		(5	)		-			(5	)
Balance as of December 31, 2002		2,136,307		2,136		38,306		(5	)		(63,293	)		(22,856	)

Loss for the year		-		-		-		-			(350,290	)		(350,290	)
Other comprehensive loss		-		-		-		(15,035	)		-			(15,035	)
Balance as of December 31, 2003		2,136,307		2,136		38,306		(15,040	)		(413,583	)		(388,181	)

Loss for the year		-		-		-		-			(288,233	)		(288,233	)
Other comprehensive loss		-		-		-		(15,069	)		-			(15,069	)
Issuance of 42,727 shares of Common Stock for cash of $1.76 per share on March 16, 2004		42,727		43		74,957		-			-			75,000
Issuance of 72,773 shares of Common Stock for cash of $1.72 per share on November 25, 2004		72,773		73		128,783		-			-			128,856
Balance as of December 31, 2004		2,251,807		2,252		242,046		(30,109	)		(701,816	)		(487,627	)

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Statements of Changes in Stockholders’ Equity (Deficit) (*) (cont.)

	US dollars (except share data)
	Common Stock						Accumulated			Deficit
	Number of shares		Amount		Additional paid in capital		other comprehensive income (loss)			accumulated during development stage			Total stockholders’ equity (deficit)

Balance as of January 1, 2005		2,251,807		2,252		242,046		(30,109	)		(701,816	)		(487,627	)
Loss for the year		-		-		-		-			(1,055,594	)		(1,055,594	)
Other comprehensive income		-		-		-		8,542			-			8,542
Issuance of 218,281 shares of Common Stock for cash of $1.72 per share on January 14, 2005		218,281		218		374,782		-			-			375,000
Issuance of 291,051 shares of Common Stock for cash of $1.72 per share on April 5, 2005		291,051		291		499,709		-			-			500,000
Issuance of 59,389 shares of Common Stock for cash of $3.37 per share on May 31, 2005		59,389		60		199,940		-			-			200,000
Stock-based compensation		52,147		52		189,564		-			-			189,616
Balance as of December 31, 2005		2,872,675		2,873		1,506,041		(21,567	)		(1,757,410	)		(270,063	)

Loss for the year		-		-		-		-			(1,282,842	)		(1,282,842	)
Other comprehensive loss		-		-		-		(57,127	)		-			(57,127	)
Issuance of 87,315 shares of Common Stock for cash of $1.47 per share on January 26, 2006		87,315		87		128,118		-			-			128,205
Issuance of 1,899 shares of Common Stock for cash of $3.63 per share on March 31, 2006		1,899		2		6,888		-			-			6,890
Issuance of 13,786 shares of Common Stock for cash of $3.63 per share on June 16, 2006		13,786		14		49,986		-			-			50,000
Issuance of 14,113 shares of Common Stock for cash of $3.63 per share on June 30, 2006		14,113		14		51,166		-			-			51,180
Issuance of 51,207 shares of Common Stock for cash of $3.91 per share on August 15, 2006		51,207		51		199,949		-			-			200,000
Issuance of 301,948 shares of Common Stock for cash of $4.31 per share on October 5, 2006		301,948		302		1,299,698		-			-			1,300,000
Issuance of 348,402 shares of Common Stock for cash of $4.31 per share on December 14, 2006		348,402		349		1,372,146		-			-			1,372,495
Stock-based compensation		63,395		63		277,434		-			-			277,497
Balance as of December 31, 2006		3,754,740		3,755		4,891,426		(78,694	)		(3,040,252	)		1,776,235

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Statements of Changes in Stockholders’ Equity (Deficit) (*) (cont.)

	US dollars (except share data)
	Common Stock						Accumulated						Deficit			Total
	Number of shares		Amount		Additional paid in capital		other comprehensive income (loss)			Receivable in respect of stock issuance			accumulated during development stage			stockholders’ equity (deficit)

Balance as of January 1, 2007		3,754,740		3,755		4,891,426		(78,694	)		-			(3,040,252	)		1,776,235
Loss for the year		-		-		-		-			-			(1,593,205	)		(1,593,205	)
Other comprehensive income		-		-		-		84,528			-			-			84,528
Stock-based compensation		28,707		29		274,630		-			-			-			274,659
Balance as of December 31, 2007		3,783,447		3,784		5,166,056		5,834			-			(4,633,457	)		542,217

Loss for the year		-		-		-		-			-			(1,528,981	)		(1,528,981	)
Other comprehensive income		-		-		-		110,134			-			-			110,134
Issuance of 61,989 shares of Common Stock for cash of $5.52 per share on September 27, 2008		61,989		62		341,938		-			-			-			342,000
Issuance of 104,220 shares of Common Stock for cash of $5.52 per share on October 7, 2008		104,220		104		574,896		-			(75,000	)		-			500,000
Stock-based compensation		-		-		84,380		-			-			-			84,380
Balance as of December 31, 2008		3,949,656		3,950		6,167,270		115,968			(75,000	)		(6,162,438	)		49,750

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Statements of Changes in Stockholders’ Equity (Deficit) (*) (cont.)

	US dollars (except share data)
	Common Stock						Accumulated						Deficit
	Number of shares		Amount		Additional paid in capital		other comprehensive income (loss)			Receivable in respect of stock issuance			accumulated during development stage			Total stockholders’ equity (deficit)

Balance as of January 1, 2009		3,949,656		3,950		6,167,270		115,968			(75,000	)		(6,162,438	)		49,750
Loss for the year		-		-		-		-			-			(1,202,296	)		(1,202,296	)
Other comprehensive loss		-		-		-		(13,367	)		-			-			(13,367	)
Issuance of 50,342 shares of Common Stock for cash of $6.02 per share in January 2009		50,342		50		302,950		-			-			-			303,000
Repayment of receivable in respect of stock issuance		-		-		-		-			75,000			-			75,000
Stock-based compensation		-		-		12,171		-			-			-			12,171
Balance as of December 31, 2009		3,999,998		4,000		6,482,391		102,601			-			(7,364,734	)		(775,742	)

Loss for the year		-		-		-		-			-			(2,788,446	)		(2,788,446	)
Other comprehensive loss		-		-		-		(119,019	)		-			-			(119,019	)
Issuance of 530,600 shares of Common Stock for cash of $6.25 per share in December 2010, net of related expenses		530,600		531		2,356,501		-			-			-			2,357,032
Stock-based interest compensation to convertible notes holders		194,391		194		1,214,749		-			-			-			1,214,943
Conversion of convertible notes		119,586		120		694,676		-			-			-			694,796
Stock-based compensation		-		-		14,575		-			-			-			14,575
Balance as of December 31, 2010		4,844,575		4,845		10,762,892		(16,418	)		-			(10,153,180	)		598,139

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Statements of Changes in Stockholders’ Equity (Deficit) (*) (cont.)

	US dollars (except share data)
	Common Stock							Accumulated other			Deficit accumulated during			Total
	Number of shares		Amount		Additional paid in capital			comprehensive loss			development stage			stockholders’ equity (deficit)

Balance as of January 1, 2011		4,844,575		4,845		10,762,892			(16,418	)		(10,153,180	)		598,139
Loss for the year		-		-		-			-			(2,364,339	)		(2,364,339	)
Other comprehensive income		-		-		-			39,052			-			39,052
Issuance of 16,320 shares of Common Stock for cash of $6.25 per share on January 31, 2011, net of related expenses		16,320		16		83,164			-			-			83,180
Issuance of 90,768 shares of Common Stock for cash of $6.25 per share on March 31, 2011, net of related expenses		90,768		91		479,810			-			-			479,901
Issuance of 40,000 shares of Common Stock for cash of $6.25 per share on April 29, 2011, net of related expenses		40,000		40		191,682			-			-			191,722
Issuance of 34,200 shares of Common Stock for cash of $6.25 per share on May 31, 2011, net of related expenses		34,200		34		179,992			-			-			180,026
Issuance of 269,680 shares of Common Stock for cash of $6.25 per share on July 29, 2011, net of related expenses		269,680		270		1,466,115			-			-			1,466,385
Fair value of warrants with down-round protection issued in connection with Common Stock issuances		-		-		(83,899	)		-			-			(83,899	)
Stock-based compensation		-		-		378,072			-			-			378,072
Balance as of December 31, 2011		5,295,543		5,296		13,457,828			22,634			(12,517,519	)		968,239

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Statements of Changes in Stockholders’ Equity (Deficit) (*) (cont.)

	US dollars (except share data)
	Common Stock									Accumulated other			Deficit accumulated during			Total
	Number of shares			Amount			Additional paid in capital			comprehensive income (loss)			development stage			stockholders’ equity (deficit)

Balance as of January 1, 2012		5,295,543			5,296			13,457,828			22,634			(12,517,519	)		968,239
Loss for the year		-			-			-			-			(2,772,307	)		(2,772,307	)
Other comprehensive loss		-			-			-			(13,709	)		-			(13,709	)
Issuance of 165,057 shares of Common Stock for cash of $7.00 per share on November 19, 2012, net of related expenses		165,057			165			917,014			-			-			917,179
Warrants classified to equity due to the expiration of the down-round protection period		-			-			48,007			-			-			48,007
Stock-based compensation		-			-			349,522			-			-			349,522
Balance as of December 31, 2012		5,460,600			5,461			14,772,371			8,925			(15,289,826	)		(503,069	)

Loss for the year		-			-			-			-			(9,796,853	)		(9,796,853	)
Other comprehensive income		-			-			-			43,777			-			43,777
Amount classified out of stockholders equity and presented as liability and temporary equity with respect to Common Stock replaced with units comprised of convertible Preferred Stock and warrants		(162,907	)		(163	)		(1,140,186	)		-			-			(1,140,349	)
Conversion of Preferred Stock		4,000			4			23,196			-			-			23,200
Stock dividend to certain Common Stock holders		-			-			278,263			-			(278,263	)		-
Warrants issued as consideration for placement services		-			-			562,805			-			-			562,805
Dividend on convertible Preferred Stock		-			-			-			-			(288,248	)		(288,248	)
Stock-based compensation		-			-			35,619			-			-			35,619
Balance as of December 31, 2013		5,301,693			5,302			14,532,068			52,702			(25,653,190	)		(11,063,118	)

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Statements of Changes in Stockholders’ Equity (Deficit) (*) (cont.)

	US dollars (except share data)
	Common Stock							Accumulated other		Deficit accumulated during			Total
	Number of shares		Amount		Additional paid in capital			comprehensive income (loss)		development stage			stockholders’ equity (deficit)

Balance as of January 1, 2014		5,301,693		5,302		14,532,068			52,702		(25,653,190	)		(11,063,118	)
Loss for the period of three months		-		-		-					(736,919	)		(736,919	)
Other comprehensive income		-		-		-			872		-			872
Conversion of Preferred Stock		1,725		2		5,886			-		-			5,888
Issuance of Common Stock relating to stock dividend to certain Common Stock holders		654		1		(1	)		-		-			-
Dividend on convertible Preferred Stock		-		-		-			-		(92,674	)		(92,674	)
Stock-based compensation		-		-		14,701			-		-			14,701

Balance as of March 31, 2014 (unaudited)		5,304,072		5,305		14,552,654			53,574		(26,482,783	)		(11,871,250	)

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Consolidated Statements of Cash Flows

	US dollars
	Three month period ended March 31,						Cumulative period from September 30, 2001 (date of inception) through March 31,
	2014			2013			2014 (*)
	(unaudited)						(unaudited)
Cash flows from operating activities:
Loss for the period		(736,919	)		(1,343,595	)		(25,823,598	)
Adjustments to reconcile loss for the period to net cash used in operating activities:
Depreciation		8,096			7,027			199,813
Increase in liability for employee rights upon retirement		-			6,327			196,506
Stock-based compensation		14,701			6,151			1,630,745
Stock-based interest compensation to convertible notes holders		-			-			1,214,943
Issuance costs allocated to warrants with down-round protection		-			611,060			390,928
Change in the fair value of warrants issued with down-round protection		(145,870	)		-			6,069,480
Linkage difference on principal of loans from stockholders		(4,717	)		(3,186	)		196,563
Interest on convertible notes		-			-			78,192
Gain on sale of property and equipment		-			-			(912	)
Gain from trading marketable securities		-			-			(12,920	)
Changes in assets and liabilities:
Decrease (increase) in other current assets		4,126			11,687			(70,526	)
Increase in accounts payable		85,925			17,848			130,658
Increase in other current liabilities		86,389			41,304			320,032
Net cash used in operating activities		(688,269	)		(645,377	)		(15,480,096	)

Cash flows from investment activities:
Increase in funds in respect of employee rights upon retirement		-			-			(149,221	)
Purchase of property and equipment		(8,854	)		(786	)		(293,226	)
Proceeds from sale of property and equipment		-			-			4,791
Investment in marketable securities		-			-			(388,732	)
Proceeds from sale of marketable securities		-			-			406,995
Short-term loan granted to related party, net of repayments		-			-			(14,252	)
Net cash used in investment activities		(8,854	)		(786	)		(433,645	)

Cash flows from financing activities
Credit from banking institutions (repayment)		23,793			(37,815	)		15,122
Proceeds from issuance of convertible notes		-			-			1,144,000
Repayment of convertible notes		-			-			(527,396	)
Proceeds from issuance of Common Stock, net of issuance expenses		-			-			11,323,559
Dividend to Preferred Stockholders		(92,674	)		-			(380,922	)
Proceeds allocated to convertible Preferred Stock, net of issuance expenses		-			3,343,253			3,960,958
Proceeds allocated to warrants with down-round protection, net of issuance expenses		-			2,093,745			1,421,983
Proceeds from stockholders loans		-			-			347,742
Net cash provided by (used in) financing activities		(68,881	)		5,399,183			17,305,046
Effect of exchange rate changes on cash and cash equivalents		(2,786	)		28,909			225,816
Increase (decrease) in cash and cash equivalents		(768,790	)		4,781,929			1,617,121
Cash and cash equivalents at beginning of the period		2,385,911			543,411			-
Cash and cash equivalents at end of the period		1,617,121			5,325,340			1,617,121

(*)	As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary A.D. Integrity Applications Ltd., which merged with a subsidiary of the Company on July 15, 2010, as part of a structural reorganization of the Group.

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Consolidated Statements of Cash Flows (cont.)

Supplementary information on financing activities not involving cash flows:

During the first quarter of 2014, 10.01 shares of Preferred Stock were converted into 1,725 shares of Common Stock. Accordingly $5,888 representing the carrying value of the Preferred Stock was reclassified from temporary equity to the Company’s statement of stockholders’ equity (deficit).

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

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Notes to Consolidated Financial Statements

NOTE 1

–

GENERAL

Integrity Applications, Inc. (the "Company") was incorporated on May 18, 2010 under the laws of the State of Delaware. On July 15, 2010, Integrity Acquisition Corp. Ltd. (hereinafter: "Integrity Acquisition"), a wholly owned Israeli subsidiary of the Company, which was established on May 23, 2010, completed a merger with A.D. Integrity Applications Ltd. (hereinafter: "Integrity Israel"), an Israeli corporation that was previously held by the stockholders of the Company. Pursuant to the merger, all equity holders of Integrity Israel received the same proportional ownership in the Company as they had in Integrity Israel prior to the merger. Following the merger, Integrity Israel remained a wholly-owned subsidiary of the Company. As the merger transaction constituted a structural reorganization, the merger has been accounted for at historical cost in a manner similar to a pooling of interests. On this basis, stockholders’ equity has been retroactively restated such that each ordinary share of Integrity Israel is reflected in stockholders' equity as a share of Common Stock of the Company as of the date of the issuance thereof by Integrity Israel. In addition, the historical financial statements of the Company for all dates prior to May 18, 2010 have been retroactively restated to reflect the activities of Integrity Israel.

Integrity Israel was incorporated in 2001 and commenced its operations in 2002. Integrity Israel, a medical device company, focuses on the design, development and commercialization of non-invasive glucose monitoring devices for home use by persons suffering with diabetes. Since its inception, Integrity Israel has devoted substantially all of its efforts to business planning, research and development and raising capital, and has not yet generated any revenues. Accordingly, Integrity Israel (and therefore the Company) is considered to be in the development stage as defined in Financial Accounting Standards Board ("FASB") Accounting Standards Codification (ASC) Topic 915, "Development Stage Entities".

Going concern uncertainty

Since its incorporation, the Company did not conduct any material operations other than those carried out by Integrity Israel. The development and commercialization of Integrity Israel's product is expected to require substantial expenditures. Integrity Israel and the Company (collectively, the "Group") have not yet generated any revenues from operations, and therefore they are dependent upon external sources for financing their operations. Since inception, the Group has incurred accumulated losses of $25,823,598, stockholder's deficit of $11,871,250 and cumulative negative operating cash flow of $15,480,096. These factors raise substantial doubt about the Group’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. During 2011, the Company raised funds via the issuance of Common Stock in a total amount of approximately $2.4 million (net of related expenses). During 2012, the Company raised a total amount of approximately $1.0 million (net of related expenses) from the issuance of Common Stock. During 2013, the Company raised funds in an approximate amount of $5.3 million (net of related expenses) from the issuance of units (the “Units”) consisting of shares of the Company’s Series A Convertible Preferred Stock (the “Preferred Stock”) and detachable warrants to purchase shares of the Company’s Common Stock. As more fully described in Note 10A2 to the Company's annual report on Form 10-K for the year ended December 31, 2013, the Company will not be permitted to, among other things, incur indebtedness without the written consent of the holders of a majority in stated value of the outstanding Preferred Stock. Until such time as the Group generates sufficient revenue to fund its operations (if ever), the Group plans to finance its operations through the sale of equity and/or debt securities and, to the extent available, short term and long term loans. There can be no assurance that Integrity Israel and the Company will succeed in obtaining the necessary financing to continue their operations.

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Notes to Consolidated Financial Statements (cont.)

NOTE 1

–

GENERAL (cont.)

Risk factors

The Group has limited operating history and faces a number of risks, including uncertainties regarding finalization of the development process, demand and market acceptance of the Group's products, the effects of technological changes, competition and the development of products by competitors. Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Group's future results. In addition, the Group expects to continue incurring significant operating costs and losses in connection with the development of its products and marketing efforts. The Group has not yet generated any revenues from its operations to fund its activities and therefore the Group is dependent on the receipt of additional funding from its stockholders and investors in order to continue as a going concern (See Note 1B).

Use of estimates in the preparation of financial statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these condensed consolidated interim financial statements, the most significant estimates and assumptions relate to (i) the fair value estimate of the warrants with the down-round protection and (ii) the going concern assumptions.

NOTE 2

–

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary (consisting of normal recurring adjustments) for a fair presentation of the Company’s financial position at March 31, 2014 and the results of its operations and cash flow for the three month period then ended.

Interim financial statements are prepared on a basis consistent with the Company’s annual financial statements. For a description of the significant accounting policies, other than the additional policy described in paragraph C below, which policy applied to reflect transactions that occurred in the current three month interim period ended March 31, 2014, refer to the Company's annual report on Form 10-K for the year ended December 31, 2013. Results of operations for the three month periods ended March 31, 2014 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2014.

The consolidated balance sheet as of December 31, 2013 was derived from the audited financial statements as of that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2013.

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Notes to Consolidated Financial Statements (cont.)

NOTE 2

–

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Warrants with Down-Round Protection

The Company has determined its derivative warrant liability to be a Level 3 fair value measurement and has used the Binomial pricing model to calculate its fair value. Because the warrants contain a price protection feature, the probability that the exercise price of the warrants would decrease as the stock price decreased was incorporated into the valuation calculations. The key inputs used in the fair value calculations were as follows:

	March 31, 2014
Dividend yield (%)		-
Expected volatility (%) (*)		105.14
Risk free interest rate (%)		1.36
Expected term of options (years) (**)		3.95
Exercise price (US dollars)		6.96
Share price (US dollars) (***)		8.50
Fair value (US dollars)		6.29

(*)

Due to the low trading volume of the Company’s Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company.

(**)

Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110.

(***)

The fair value per share of the Company’s Common Stock as of March 31, 2014 was based on the management’s estimate which was based among other factors on the price per share of the Company’s Common Stock, as reported on the OTC Bulletin Board, during the reported period.

Recently issued accounting pronouncements

ASC Topic 830, "Foreign Currency Matters"

Effective January 1, 2014, the Group adopted Accounting Standards Update 2013-5, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity ("ASU 2013-5").

ASU 2013-5 clarifies among other things that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in-substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.

For public companies, the amendments in ASU 2013-5 became effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted.

The adoption of the standard did not have a material impact on the Group's consolidated results of operations and financial condition.

INTEGRITY APPLICATIONS, INC.

(A Development Stage Company)

Notes to Consolidated Financial Statements (cont.)

NOTE 3

–

LOSS PER SHARE

In periods of net loss, basic loss per share is computed by dividing net loss for the period after consideration of the effect of dividend on preferred stock by the weighted average number of shares outstanding during the period.

The loss and the weighted average number of shares used in computing basic and diluted loss per share for the three month periods ended March 31, 2014 and 2013 are as follows:

	US dollars
	Three month period ended March 31,
	2014		2013
	(unaudited)
Loss for the period		736,919		1,343,595
Dividend on Preferred Stock		92,674		15,750
Loss for the period attributable to common stockholders		829,593		1,359,345

	Number of shares
	Three month period ended March 31,
	2014		2013

Number of shares:
Weighted average number of shares used in the computation of basic and diluted earnings per share		5,302,980		5,427,589

Total weighted average number of common shares related to outstanding convertible preferred stock, options and warrants excluded from the calculations of diluted loss per share (*)		3,417,231		3,428,044

—————————————

(*)

All outstanding convertible Preferred Stock, stock options and warrants have been excluded from the calculation of the diluted net loss per share for all the reported periods because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was anti-dilutive.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies or prospects. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including statements regarding our future activities, events or developments, including such things as future revenues, product development, market acceptance, responses from competitors, capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success, projected performance and trends, and other such matters, are forward-looking statements. The words “believe,” “expect,” “or “anticipate” and other similar words and phrases, are intended to identify forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q are based on certain historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. These statements relate only to events as of the date on which the statements are made and we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All of the forward-looking statements made in this Quarterly Report on Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties that may cause actual results to differ materially. Risks and uncertainties, the occurrence of which could adversely affect our business, include the risks identified under the caption “Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2013. The following discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.

Overview

We are a development stage medical device company focused on the design, development and commercialization of non-invasive glucose monitoring devices for use by persons suffering from diabetes. Our wholly-owned Israeli subsidiary, Integrity Israel, was founded in 2001 with a mission to develop, produce and market non-invasive glucose monitors for home use by diabetics. We have developed a non-invasive blood glucose monitor, the GlucoTrack DF-F glucose monitoring device, which is designed to help people with diabetes obtain blood glucose level readings without the pain, inconvenience, cost and difficulty of conventional (invasive) spot finger stick devices. The GlucoTrack DF-F utilizes a patented combination of ultrasound, electromagnetic and thermal technologies to obtain blood glucose measurements in less than one minute via a small sensor that is clipped onto one’s earlobe and connected to a small, handheld control and display unit, all without drawing blood.

On June 4, 2013, we received our CE Mark approval for the GlucoTrack DF-F model non-invasive glucose monitoring device from the Notified Body. Receipt of the CE Mark allows us to market and sell the GlucoTrack DF-F glucose monitoring device in EU member countries that have adopted the European MDD without being subject to additional national regulations with regard to demonstration of performance and safety (although certain EU member countries may request or require additional performance and/or safety data from time to time, on a case-by-case basis). The CE Mark also permits the sale in countries that have an MDD Mutual Recognition Agreement with the EU. The GlucoTrack DF-F has not yet been approved for commercial sale in the United States. We expect to begin clinical trials in the United States during 2014, if our clinical trial protocol is approved by the United States Food and Drug Administration (the “FDA”).

Since receiving CE Mark approval for our GlucoTrack model DF-F monitoring device, we have expanded our primary focus to include, in addition to research and development activities, preparation for anticipated future mass-production and distribution of the GlucoTrack model DF-F in EU member countries and other countries that have an MDD Mutual Recognition Agreement with the EU. While we have not yet commenced sales of the GlucoTrack model DF-F, we have entered into exclusive distribution agreements with distribution firms in several countries, and expect sales to commence in such countries during 2014. We are also in the process of negotiating agreements with third party manufacturers in Asia for mass production of the GlucoTrack Model DF-F, as we do not have commercial manufacturing facilities and do not intend to build commercial manufacturing facilities of our own in the foreseeable future. Our continuing research and development activities are primarily focused on hardware and software improvements, clinical trials to test the performance of the GlucoTrack device when used by children and teenagers between the ages of 6 and 18, preparation for future FDA trials, as well as development of a new device in the family of GlucoTrack.

We have not yet generated any revenues from our operations and have incurred losses of $25,823,598 from inception through March 31, 2014, stockholder’s deficit of $11,871,250 and cumulative negative operating cash flow of $15,480,096. We are dependent upon external sources for financing our operations and there can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. As a result, our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Historical Note

On July 15, 2010, we completed a reverse triangular merger with Integrity Israel and Integrity Acquisition Corp. Ltd., an Israeli corporation and a wholly owned subsidiary of ours, pursuant to which Integrity Acquisition Corp. Ltd. merged with and into Integrity Israel and all of the stockholders and option holders of Integrity Israel became entitled to receive shares and options in us in exchange for their shares and options in Integrity Israel (the “Reorganization”). Following the Reorganization, the former equity holders of Integrity Israel received the same proportional ownership in us as they had in Integrity Israel prior to the Reorganization. As a result of the Reorganization, Integrity Israel became a wholly owned subsidiary of ours.

Significant Accounting Policies

Our consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements appearing in our annual report on Form 10-K for the year ended December 31, 2013. Our management believes that, as for the financial statements for the periods included in this report, the going concern assessment and the fair value estimate of the warrants with the down-round protection (see Notes 1 and 2 in the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q). However, due to the early stage of operations of the Company, there are no other accounting policies that are considered to be critical accounting policies by management.

Going Concern Uncertainty

The development and commercialization of our product will require substantial expenditures. We have not yet generated any revenues and have incurred substantial accumulated losses and cumulative negative operating cash flows since inception. We currently have no sources of recurring revenue and are therefore dependent upon external sources for financing our operations. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. As a result, our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. Management’s plans concerning these matters are described in Note 1B to our annual report on Form 10-K for the year ended December 31, 2013; however management cannot assure that its plans will be successful in addressing these issues. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Recently Issued Accounting Pronouncements

ASC Topic 830, "Foreign Currency Matters"

For public companies, the amendments in this Update became effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted.

The adoption of the standard did not have a material impact on the Group's consolidated results of operations and financial condition.

Results of Operations

The following discussion of the our operating results explains material changes in our results of operations for the three months period ended March 31, 2014 compared with the same period ended March 31, 2013. The discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report.

Revenues

We did not have any revenues during the three months ended March 31, 2014 and 2013, as we have not yet commercialized our GlucoTrack product candidate.

Research and Development Expenses

Research and development expenses were $451,084 for the three months ended March 31, 2014, as compared to $504,245 for the prior-year period. The decrease is attributable primarily to lower salaries and related expenses resulting from our shift of resources towards the marketing of the GlucoTrack DF-F. Research and development expenses consist primarily of salaries and other personnel-related expenses, including stock-based compensation expenses, materials, travel expenses, clinical trials and other expenses. We expect to maintain similar levels of research and development expenses through the remainder of 2014; however, we may adjust the level of our research and development expenses based on available financial resources and based on our commercial needs including the FDA registration process, specific requirements from customers, development of new GlucoTrack models and others.

Selling, Marketing and General and Administrative Expenses

Selling, marketing and General and administrative expenses were $436,102 for the three months period ended March 31, 2014, as compared to $183,579 for the prior-year period. The increase is attributable primarily to increased professional fees, including investor relations and public relations expenses, business development and strategic planning services and other expenses relating to our reporting and other obligations as a public reporting company. In addition, the Company incurred higher salaries and related expenses, as well as higher travel expenses, as a result our shift of resources towards sales and marketing of the GlucoTrack DF-F. Selling, Marketing and General and administrative expenses consist primarily of professional services, salaries and other related expenses for executive, finance and administrative personnel, including stock-based compensation expense. Other general and administrative costs and expenses include facility-related costs not otherwise included in research and development costs and expenses, and professional fees for legal and accounting services. We expect selling, marketing and general and administrative expenses to increase through the remainder of 2014 and beyond as we incur increased costs to comply with the reporting and other obligations applicable to public reporting companies and continue our focus on marketing and sales of the GlucoTrack DF-F.

Financing Expenses, net

Financing income, net was $(150,267) for the three months period ended March 31, 2014, as compared to an expense of $655,771 for the prior-year period. The change is primarily attributable to change of fair market value adjustments relating to our warrants with down-round protection that were issued to investors and by issuance expenses allocated to such warrants at the issuance date.

Net Loss

Net loss was $736,919 for the three months period ended March 31, 2014, as compared to $1,343,595 for the prior-year period.

Liquidity and Capital Resources

We currently have limited liquidity. As of March 31, 2014 and May 8, 2014, cash on hand was approximately $1.6 million and $1.3 million, respectively. Based on our current cash burn rate, strategy and operating plan, we believe that our cash and cash equivalents will enable us to operate for a period of approximately four months from the date of this report. In order to fund our anticipated liquidity needs beyond such four month period (or possibly earlier if our current cash burn rate, strategy or operating plan change in a way that accelerates or increases our liquidity needs), we will need to raise additional capital.

As of March 31, 2014, we had NIS 300,000 (approximately $86,033 based on the exchange rate of 3.487 NIS/dollar as of March 31, 2014) available for borrowing under our line of credit with Bank HaPoalim. Borrowings under the line of credit are secured by our funds on deposit with the bank at the time of borrowing, which generally must be sufficient to cover the principal amount of the borrowings in full. As of March 31, 2014, we did not have any borrowings outstanding under the line of credit.

Integrity Israel is party to a loan and investment agreement dated February 18, 2003 with Y.H. Dimri Holdings (“Dimri”), pursuant to which Dimri loaned Integrity Israel a principal amount of NIS 1,440,000 ($412,962, based on the exchange rate of $3.487 NIS/dollar as of March 31, 2014), subject to linkage differences in Israel. In addition, Messrs. Avner Gal and Zvi Cohen collectively loaned Integrity Israel NIS 176,000 ($50,473 based on the same exchange rate) in May 15, 2002 pursuant to a board approval. Messrs. Nir Tarlovsky, Yitzhak Fisher and Asher Kugler loaned Integrity Israel $75,000 on March 16, 2004. These loans, in addition to the loan from Dimri mentioned above, are not required to be repaid until the first year in which we realize profits in our annual income statement (accounting profit). At such time, the loans are to be repaid on a quarterly basis in an amount equal to 10% of our total sales after deduction of VAT in the relevant quarter, beginning on the quarter following the first year in which we realize profits in our annual income statement. The total amount to be repaid by us to each lender shall be an amount equal to the aggregate principal amount loaned by such lender to us, plus an amount equal to the product of the amount of each payment made by us in respect of such loan multiplied by the percentage difference between the Israeli Consumer Price Index on the date on which the loan was made and the Israeli Consumer Price Index on the date of such payment. However, notwithstanding the above-mentioned mechanism, we will not be required to repay the loans during any time when such repayment would cause a deficit in our working capital. Our board of directors is entitled to modify the repayment terms of these loans, so long as such modification does not discriminate against any particular lender, and provided that all payments must be allocated among the lenders on a pro-rata basis.

Integrity Israel is required to pay royalties to the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of the State of Israel at a rate ranging between 3-5% of the proceeds from the sale of the Company’s products arising from the development plan up to an amount equal to $93,462, plus interest at LIBOR from the date of grant. As of March 31, 2014, the contingent liability with respect to royalty payment on future sales equals to approximately $93,462, excluding interest.

Net Cash Used in Operating Activities for the Three Month Periods Ended March 31, 2014 and March 31, 2013

Net cash used in operating activities was $688,269 and $645,377 for the three month periods ending March 31, 2014 and 2013, respectively. Net cash used in operating activities primarily reflects the net loss for those periods of $736,919 and $1,343,595, respectively, which was increased by non-cash change in fair value of warrants with down-round protection of $145,870 and $0, respectively, and partially offset by issuance costs allocated to warrants with down-round protection of $0 and $611,060, respectively, and changes in operating assets and liabilities in the amounts of $176,440 and $70,839, respectively.

Net Cash Used in Investing Activities for the Three Month Periods Ended March 31, 2014 and March 31, 2013

Net cash used in investing activities was $8,854 and $786 for the three month periods ended March 31, 2014, and 2013, respectively, and was used to purchase equipment (such as computers, R&D and office equipment).

Net Cash Provided by (used in) Financing Activities for the Three Month Periods Ended March 31, 2014 and March 31, 2013

Net cash provided by (used in) financing activities was $(68,881) and $5,399,183 for the three month period ended March 31, 2014 and 2013, respectively. Cash provided by financing activities reflects net capital raised in the amounts of $0 and $5,436,998 for the three month period ended March 31, 2014 and 2013, respectively, offset partially by dividends paid to the holders of our Preferred Stock in the amounts of $92,674 and $0 for the three month period ended March 31, 2014 and 2013, respectively.

Off-Balance Sheet Arrangements

As of March 31, 2014, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2014. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2014, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 6. Exhibits.

Exhibit No.		Description
3.1		Certificate of Incorporation of Integrity Applications, Inc. (1)
3.2		Certificate of Amendment to Certificate of Incorporation of Integrity Applications, Inc. (1)
3.3		Certificate of Designation of Preferences and Rights of Series A 5% Convertible Preferred Stock (2)
3.4		Bylaws of Integrity Applications, Inc. (1)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document (3)
101.SCH		XBRL Schema Document (3)
101.CAL		XBRL Calculation Linkbase Document (3)
101.LAB		XBRL Label Linkbase Document (3)
101.PRE		XBRL Presentation Linkbase Document (3)
101.DEF		XBRL Definition Linkbase Document (3)

—————————————

(1)	Previously filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on August 22, 2011, which exhibit is incorporated herein by reference.

(2)	Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013, which exhibit is incorporated herein by reference.

(3)

Pursuant to Rule 406T of Regulation S-T, the interactive files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 13, 2014

	INTEGRITY APPLICATIONS, INC.
	By:	/s/ Avner Gal
	Name:	Avner Gal
	Title	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Eran Hertz
	Name:	Eran Hertz
	Title	Chief Financial Officer (Principal Accounting Officer)

EXHIBIT INDEX

Exhibit No.		Description
3.1		Certificate of Incorporation of Integrity Applications, Inc. (1)
3.2		Certificate of Amendment to Certificate of Incorporation of Integrity Applications, Inc. (1)
3.3		Certificate of Designation of Preferences and Rights of Series A 5% Convertible Preferred Stock (2)
3.4		Bylaws of Integrity Applications, Inc. (1)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document (3)
101.SCH		XBRL Schema Document (3)
101.CAL		XBRL Calculation Linkbase Document (3)
101.LAB		XBRL Label Linkbase Document (3)
101.PRE		XBRL Presentation Linkbase Document (3)
101.DEF		XBRL Definition Linkbase Document (3)

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(1)	Previously filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on August 22, 2011, which exhibit is incorporated herein by reference.

(2)	Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013, which exhibit is incorporated herein by reference.

(3)