NanoVibronix, Inc. - Quarter Report: 2018 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2018

OR

For the transition period from __________ to ___________

Commission file number: 001-36445

NanoVibronix, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (914) 233-3004

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 ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant has been required to submit and post such files). Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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.

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any 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 ☒

The number of shares outstanding of the registrant’s common stock, par value $0. 001 per share, as of August 14, 2018 was 3,957,953 shares.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

*) Represents an amount lower than $ 1.

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

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

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

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

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

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

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

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2017 are applied consistently in these financial statements.

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

Share based compensation

During the six-month period ended June 30, 2018 and 2017, the Company recorded share-based compensation in a total amount of $168 and $536, respectively.

During the three-month period ended June 30, 2018 and 2017, the Company recorded share-based compensation in a total amount of $59 and $185, respectively.

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

As of June 30, 2018, the total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $560, which is expected to be recognized over a weighted average period of approximately 2.3 years.

Warrant activity

During the six and three month period ended June 30, 2018 the Company received $31 on the exercise of Warrants for 22,088 shares.

The Company currently leases its office facilities on a three year lease with the right to cancel the lease with 90 days advance notice.

Future minimum lease commitments under non-cancelable operating lease agreements as of June 30, 2018 are as follows:

Rent and related expenses were $10 and $13 for the six months ended June 30, 2018 and 2017, and $3 and $7 for the three months ended June 30, 2018 and 2017 respectively.

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

All outstanding share options and warrants for the six months ended June 30, 2018 and 2017 have been excluded from the calculation of the diluted net loss per share because all such securities are anti-dilutive for all periods presented.

The following table summarizes the Company’s securities, in common share equivalents, which have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive:

NANOVIBRONIX, INC. AND ITS SUBSIDIARY

Summary information about geographic areas:

The Company manages its business on the basis of one reportable segment, and derives revenues from selling its products directly to patients as well as through distributor agreements. The following is a summary of revenues within geographic areas:

During the six and three month period ended June 30, 2018, revenues from distributors accounted for 49% and 73% of total revenues. During the six and three month period ended June 30, 2017, revenues from distributors accounted for 36% and 37% of total revenues.

The Company’s long-lived assets are all located in Israel.  

The Company evaluates events or transactions that occur after the balance sheet date but prior to the issuance of financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. For its interim consolidated financial statements as of June 30, 2018 (unaudited) and for the six months period then ended (unaudited), the Company evaluated subsequent events through August 14, 2018 the date that the consolidated financial statements were issued.

On July 4, 2018, Jona Zumeris, Vice President of Technology and member of the board of directors of NanoVibronix, Inc. and the Company’s subsidiary, submitted his resignation as a member of the board of directors and all positions from the Company and the Company’s subsidiary, effective as of July 4, 2018. Dr. Zumeris’s resignation was not in connection with any disagreement with the Company on any matter relating to the Company’s operations, policies or practices, or any other matter.

On July 4, 2018, the Company and Dr. Zumeris and his wife, Janina (Ina) Zumeris entered into a Separation and Release Agreement (the “Separation Agreement”), providing that Dr. Zumeris shall resign from all positions at the Company and the Company’s subsidiary, effective as of the execution of the Separation Agreement and that Dr. Zumeris and Janina Zumeris will cooperate with the Company and its officers on meeting certain technical and administrative milestones during the transition period ending 60 days following the date of the Separation Agreement (the “Termination Date”). If Dr. Zumeris and Janina Zumeris have met such milestones to the satisfaction of the Company and fulfilled other obligations under the Separation Agreement, (i) Dr. Zumeris and Janina Zumeris, will be entitled to receive as consulting payments an aggregate of NIS 65,000 per month for 12 months, commencing 30 days after the Termination Date; (ii) the Company’s management, beginning on November 4, 2018, will use its best efforts to allow the sale of the Company’s securities owned by Dr. Zumeris, provided that such sale would be in compliance with the applicable U.S. securities laws and regulations, and provided further, that, if the Company’s shares of common stock held by Dr. Zumeris had not been sold at a price lower than $4.45 during the fourteen month period from July 4, 2018, and the value of the unsold securities Dr. Zumeris owns plus the value of cash received by Dr. Zumeris from the sale of the Company’s securities during such fourteen month period (the “Aggregate Amount”), in aggregate, is less than $950,000, then the Company will make up the difference between $950,000 and the Aggregate Amount by extending the term of engagement of Dr. Zumeris and Janina Zumeris’s consulting services and paying the consulting payments of NIS 65,000 per month. In addition, if the Company (i) grants a license for the skin rejuvenation technology, then the Company will pay Dr. Zumeris 10% from the payments received by the Company until an aggregate amount of $100,000 has been paid to Dr. Zumeris, (ii) sells the skin rejuvenation technology and/or the rights to such as a standalone product, the Company will pay Dr. Zumeris $100,000 from the proceeds of such sale, or (iii) sells the skin rejuvenation devices, the Company will pay Dr. Zumeris $5 per unit an aggregate amount of $100,000 has been paid to Dr. Zumeris.

In exchange for the consideration described above, Dr. Zumeris and Janina Zumeris agreed that, among other things, subject to the payments described above, Dr. Zumeris and Janina Zumeris will not have in the future any demands or claims for payment of salary or compensation of any kind against the Company. The Separation Agreement contains releases of any and all claims against the Company and restrictive covenants regarding intellectual property, non-disparagement, non-disclosure, non-compete and non-solicitation customary in executive separation agreements.

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

You should read the following discussion and analysis of financial condition and results of operations in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Unless the context requires otherwise, references in this Form 10-Q to the “Company,” “NanoVibronix,” “we,” “our” and “us” refer to NanoVibronix, Inc., a Delaware corporation, and its subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

Our ability to continue as a going concern.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and financial performance, you should carefully review the risks and uncertainties described under the heading “Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and those described from time to time in our future reports filed with the Securities and Exchange Commission. Moreover, new risks regularly emerge and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this prospectus. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Overview

We are a medical device company focusing on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals. Our WoundShield, PainShield and UroShield products are backed by novel technology which relates to ultrasound delivery through surface acoustic waves.

Critical Accounting Policies

A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are more fully described in both (i) “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) Note 2 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017. There have not been any material changes to such critical accounting policies since December 31, 2017.

The currency of the primary economic environment in which our operations are conducted is the U.S. dollar (“$” or “dollar”). Accordingly, our functional currency is the dollar.

Results of Operations

Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017

Revenues. For the six months ended June 30, 2018 and 2017, our revenues were approximately $209,000 and $104,000, respectively, an increase of approximately 104%, or $105,000, between the periods. The increase was mainly attributable to increased sales to distributors in the six months ended June 30, 2018 as well as increased sales of our Uroshield product. Our revenues may fluctuate as we add new consumers or when existing distributors or consumers make large purchases of our products during one period and no purchases during another period. Our revenues may fluctuate from quarter-to-quarter and any growth or decrease in revenues by quarter may not be linear or consistent.

For the six months ended June 30, 2018, the percentage of revenues attributable to our products was: PainShield - 76% and UroShield - 24%. For the six months ended June 30, 2017, the percentage of revenues attributable to our products was: PainShield - 93% and UroShield - 7%. For the six months ended June 30, 2018 and 2017, the percentage of revenues attributable to our disposable products was 27% and 42%, respectively. For the six months ended June 30, 2018 and 2017, the portion of our revenues that was derived from distributors was 49% and 36%, respectively.

Gross Profit. For the six months ended June 30, 2018 and 2017, gross profit was approximately $132,000 and $70,000, respectively, an increase of approximately 89%, or $62,000, mainly due to the increase of revenues and slightly offset by the increased sales to distributors that typically are sold at a lower margins than sales that are direct to consumer.

Gross profit as a percentage of revenues was approximately 63% and 67% for the six months ended June 30, 2018 and 2017, respectively. The decrease in gross profit as a percentage is mainly due to the aforementioned increase in sales to distributors.

Research and Development Expenses. For the six months ended June 30, 2018 and 2017, research and development expenses were approximately $286,000 and $314,000, respectively, a decrease of approximately 9%, or $28,000, between the periods. The decrease was primarily due to a decrease in expenses related to our clinical trials.

Research and development expenses as a percentage of total revenues were approximately 137% and 302% for the six months ended June 30, 2018 and 2017, respectively. The decrease was due primarily to the increase in sales as well as the decrease in expenses described above.

Our research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, stock-based compensation expenses, expenses related to subcontracting, patents application and registration, clinical trial and facilities expenses associated with and allocated to research and development activities.

Selling and Marketing Expenses. For the six months ended June 30, 2018 and 2017, selling and marketing expenses were approximately $526,000 and $200,000, respectively, an increase of approximately 163%, or $326,000, between the periods. The increase was mainly due to an increase in our sales staff, sales consultants, and marketing activities which were limited in 2017 because of cash restraints.

Selling and marketing expenses as a percentage of total revenues were approximately 252% and 192% for the six months ended June 30, 2018 and 2017, respectively. The increase was due primarily to the increase in expenses described above partially offset by the increase in revenues.

Selling and marketing expenses consist mainly of payroll expenses to direct sales and marketing employees, stock-based compensation expenses, travel expenses, advertising and marketing expenses, rent and facilities expenses associated with and allocated to selling and marketing activities.

General and Administrative Expenses. For the six months ended June 30, 2018 and 2017, general and administrative expenses were approximately $934,000 and $1,017,000, respectively, a decrease of approximately 8%, or $83,000, between the periods. The decrease was mainly due to a $368,000 decrease in our stock based compensation and offset by increased compensation costs and public company expenses.

General and administrative expenses as a percentage of total revenues were approximately 446% and 978% for the six months ended June 30, 2018 and 2017, respectively. The decrease was due primarily to the increase in revenues described above offset somewhat by the decrease in expenses described above.

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, share-based compensation expenses, accounting, legal and facilities expenses associated with general and administrative activities and costs associated with being a publicly traded company.

Financial Expenses, net. For the six months ended June 30, 2018 and 2017, financial income (expenses), net were approximately $23,000 compared to a loss of $(242,000), respectively, an increase of approximately $265,000, between the periods. The income in 2018 was derived primarily from gains on its foreign currency transactions. The expense in 2017 was derived primarily from an expense of approximately $320,000 related to the issuance of the Warrants amortized over the life of the Promissory Notes issued in the first two quarters of 2017, and redeemed in November 2017, offset by a $131,000 reduction due to a lower valuation adjustment of our warrants that were issued with our 2013 and 2015 convertible promissory notes and exercised in full in October 2017.

Tax expenses. For the six months ended June 30, 2018 and 2017, tax expenses remained the same at $22,000. The tax expense is computed by multiplying income before taxes at our Israeli subsidiary by the appropriate tax rate.

Loss. Our loss decreased by approximately $112,000, or 6.5%, to approximately $1,613,000 for the six months ended June 30, 2018 from approximately $1,725,000 in the same period of 2017. The decrease in net loss resulted primarily from the factors described above.

Three months Ended June 30, 2018 Compared to Three months Ended June 30, 2017

Revenues For the three months ended June 30, 2018 and 2017, our revenues were approximately $132,000 and $52,000, respectively, an increase of approximately 153%, or $80,000, between the periods. The increase was mainly attributable to increased sales to distributors in the three months ended June 30, 2018 as well as increased sales of our UroShield product. Our revenues may fluctuate as we add new consumers or when existing distributors or consumers make large purchases of our products during one period and no purchases during another period. Our revenues may fluctuate from quarter-to-quarter and any growth or decrease in revenues by quarter may not be linear or consistent.

For the three months ended June 30, 2018, the percentage of revenues attributable to our products was: PainShield - 64% and UroShield - 36%. For the three months ended June 30, 2017, the percentage of revenues attributable to our products was: PainShield - 92% and UroShield - 8%. For the three months ended June 30, 2018 and 2017, the percentage of revenues attributable to our disposable products was 31% and 46%, respectively. For the three months ended June 30, 2018 and 2017, the portion of our revenues that was derived from distributors was 73% and 37%, respectively.

Gross Profit. For the three months ended June 30, 2018 and 2017, gross profit was approximately $77,000 and $34,000, respectively, an increase of approximately 126%, or $43,000, mainly due to the increase of revenues and slightly offset by the increased sales to distributors that typically are sold at a lower margins than sales that are direct to consumer.

Gross profit as a percentage of revenues was approximately 58% and 65% for the three months ended June 30, 2018 and 2017, respectively. The decrease in gross profit as a percentage is mainly due to the aforementioned increase in sales to distributors.

Research and Development Expenses. For the three months ended June 30, 2018 and 2017, research and development expenses were approximately $151,000 and $164,000, respectively, a decrease of approximately 8%, or $13,000, between the periods. The decrease was primarily due to a decrease in expenses related to our clinical trials.

Research and development expenses as a percentage of total revenues were approximately 114% and 315% for the three months ended June 30, 2018 and 2017, respectively. The decrease was due primarily to the increase in sales as well as the decrease in expenses described above.

Our research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, stock-based compensation expenses, expenses related to subcontracting, patents application and registration, clinical trial and facilities expenses associated with and allocated to research and development activities.

Selling and Marketing Expenses. For the three months ended June 30, 2018 and 2017, selling and marketing expenses were approximately $297,000 and $106,000, respectively, an increase of approximately 180%, or $191,000, between the periods. The increase was mainly due to an increase in our sales staff, sales consultants, and marketing activities which were limited in 2017 because of cash restraints.

Selling and marketing expenses as a percentage of total revenues were approximately 225% and 204% for the three months ended June 30, 2018 and 2017, respectively. The increase was due primarily to the increase in expenses described above partially offset by the increase in revenues.

Selling and marketing expenses consist mainly of payroll expenses to direct sales and marketing employees, stock-based compensation expenses, travel expenses, advertising and marketing expenses, rent and facilities expenses associated with and allocated to selling and marketing activities.

General and Administrative Expenses. For the three months ended June 30, 2018 and 2017, general and administrative expenses were approximately $454,000 and $424,000, respectively, an increase of approximately 7%, or $30,000, between the periods. The increase was mainly due to increased compensation costs and public company expenses offset by decreased stock based compensation expenses.

General and administrative expenses as a percentage of total revenues were approximately 344% and 815% for the three months ended June 30, 2018 and 2017, respectively. The decrease was due primarily to the increase in revenues described above offset somewhat by the decrease in expenses described above.

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, share-based compensation expenses, accounting, legal and facilities expenses associated with general and administrative activities and costs associated with being a publicly traded company.

Financial Expenses, net. For the three months ended June 30, 2018 and 2017, financial income (expenses), net were approximately $11,000 compared to an expense of $178,000, respectively, an increase of approximately $189,000, between the periods. The income in 2018 was derived primarily from gains on its foreign currency transactions. The expense in 2017 resulted from expenses incurred from the issuance of the Warrants amortized over the life of the 2017 Notes issued in the first two quarters of 2017 offset by a reduction derived by a lower valuation adjustment of our warrants that were issued with our 2013 and 2015 convertible promissory notes.

Tax expenses. For the three months ended June 30, 2018 and 2017, tax expenses were $10,000 and $11,000, respectively. The tax expense is computed by multiplying income before taxes at our Israeli subsidiary by the appropriate tax rate. The decrease in our tax expenses was due to .

Loss. Our loss decreased by approximately $25,000, or 3.4%, to approximately $824,000 for the three months ended June 30, 2018 from approximately $849,000 in the same period of 2017. The decrease in net loss resulted primarily from the factors described above.

Liquidity and Capital Resources

We incurred losses in the amount of $1,613,000 during the six month period ended June 30, 2018, and accumulated negative cash flow from operating activities of $1,871,000 for the six month period ended June 30, 2018. We expect to continue to incur losses and negative cash flows from operating activities and as a result, we may not have sufficient resources to fund our operation for the next twelve months. These conditions raise doubts about our ability to continue as a going concern. During the next twelve months management expects that the Company will need to raise additional capital to finance its losses and negative cash flows from operations for the next twelve months and may continue to be dependent on additional capital raising as long as our products do not reach commercial profitability.

During the six months ended June 30, 2018, and through August 14, 2018, we met our short-term liquidity requirements from our existing cash reserves which includes the proceeds from the sales of convertible promissory notes between March and September 2017 in an aggregate amount of $1,380,000, as well as the net proceeds of $5,056,000 from our underwritten public offering of common stock and warrants which closed on November 6, 2017. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products, our development of future products and competing technological and market developments. We intend to use these proceeds to meet our short-term liquidity requirements but may need to sell our securities to advance our long-term plans. It is our current belief that if we do not continue to see significant increases in revenues, or if we are unable to raise additional capital at a later time in the next twelve months, we may need to reduce our operating budget as well as sales and marketing expenses which may impair our ability to execute our business objectives. However, we may be unable to raise sufficient additional capital when we require it or upon terms favorable to us. In addition, the terms of any securities we issue in future financings may be more favorable to new investors and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then outstanding. If we are unable to obtain adequate funds on reasonable terms, we may need to curtail operations significantly, including possibly postponing anticipated clinical trials or entering into financing agreements with unattractive terms.

We do not have any material commitments to capital expenditures as of June 30, 2018, and we are not aware of any material trends in capital resources that would impact our business.

Six months Ended June 30, 2018 Compared to Six months Ended June 30, 2017

General. As of June 30, 2018, we had cash and cash equivalents of approximately $2,515,000, compared to approximately $4,360,000 as of December 31, 2017. The decrease is attributable to our net cash used in operating activities. We have historically met our cash needs through a combination of issuance of equity, borrowing activities and sales. Our cash requirements are generally for product development, research and development cost, marketing and sales activities, finance and administrative cost, capital expenditures and general working capital.

Cash used in our operating activities was approximately $1,871,000 for the six months ended June 30, 2018 and $919,000 for the same period in 2017. The increase in our cash usage was mainly associated with the increase in our net operating loss, excluding non-cash items such as stock-based compensation, for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, for the reasons described above.

Cash used in investing activities was $5,000 and $2,000 for the six month periods ended June 30, 2018 and 2017, respectively, and was related to purchases of fixed assets.

Cash provided by financing activities was approximately $31,000 for the six months ended June 30, 2018 derived from proceeds received from the exercise of warrants, compared to $1,030,000 for the six months ended June 30, 2017 derived from proceeds received from the issuance of 2017 Notes.

Off Balance Sheet Arrangements

As of June 30, 2018, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Factors That May Affect Future Operations

We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment. Our operating results could also be impacted by a weakening of the Euro and strengthening of the New Israeli Shekel, or NIS, both against the U.S. dollar. Lastly, other economic conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4.  Controls and Procedures

Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level as of June 30, 2018.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the six months ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we may be involved in litigation that arises through the normal course of business. As of the date of this filing, we are not a party to any material litigation nor are we aware of any such threatened or pending litigation.

There are no material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our common stock, or any associate of any of the foregoing is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

During the fiscal quarter ended June 30, 2018, there were no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 30, 2018.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

Not applicable.

Item 4.  Mine Safety Disclosures

Not Applicable.

Item 5.  Other Information

None

Item 6.  Exhibits

See Index to Exhibits.

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.

EXHIBIT INDEX