UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-K

 

 

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2019

 

Commission file number 0-54862

 

E-QURE CORP.

(Exact Name Of Registrant As Specified In Its Charter)

 

Delaware   47-1691054
(State of Incorporation)   (I.R.S. Employer Identification No.)
     
20 West 64th Street, Suite 39G, New York, NY   10023
(Address of Principal Executive Offices)   (ZIP Code)

 

Registrant’s Telephone Number, Including Area Code: (972) 8 916-7333

 

Securities registered pursuant to Section 12(g) of the Act: 

 

Title of each class   Trading Symbol   Name of each exchange on which registered
None   N/A   N/A

 

Securities Registered Pursuant to Section 12(g) of The Act: Common Stock, $0.00001

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

On June 30, 2019, the aggregate market value of the 24,133,806 common stock held by non-affiliates of the Registrant was approximately $2,413,380 based on $0.10 per share, the last trade of the Registrants common stock on June 30, 2019. On April 13, 2020, the Registrant had 34,546,060 shares of common stock outstanding.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company.

 

Large accelerated filer [  ] Accelerated filer [  ] Non-Accelerated filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

 

 

 
 

 

TABLE OF CONTENTS

 

Item   Description   Page
         
PART I   3
         
ITEM 1.   DESCRIPTION OF BUSINESS   3
ITEM 1A.   RISK FACTORS   7
ITEM 1B.   UNRESOLVED STAFF COMMENTS   14
ITEM 2.   DESCRIPTION OF PROPERTY   14
ITEM 3.   LEGAL PROCEEDINGS   14
ITEM 4.   MINE SAFETY DISCLOSURES   14
         
PART II   15
         
ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS   15
ITEM 6.   SELECTED FINANCIAL DATA   16
ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION   17
ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK   19
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   20
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   32
ITEM 9A.   CONTROLS AND PROCEDURES   32
ITEM 9B.   OTHER INFORMATION   32
         
PART III   33
         
ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE   33
ITEM 11.   EXECUTIVE COMPENSATION   35
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS   35
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE   36
ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES   36
ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES   37

 

2
 

 

Cautionary Statement regarding Forward-Looking Statements

 

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Registrant has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the Registrant that may cause its actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in this Annual Report on Form 10-K and in the Registrant’s other Securities and Exchange Commission filings.

 

PART I

 

ITEM 1. DESCRIPTION OF BUSINESS

 

Overview

 

The Company was incorporated under the name Creative Learning Products, Inc. in the State of New Jersey on August 31, 1988 and changed its name to Creative Gaming, Inc. in May 1997. The Company changed its name to Management Services, Inc. in October 2006. In August 2008, the Company changed its name to Centriforce Technology Corp. In May 2010, the Company changed its name to ADB International Group, Inc. The Company changed its name to its current name, E-Qure Corp., on August 27, 2014.

 

On May 12, 2014, the board of directors approved a plan to redomicile from the State of New Jersey to the State of Delaware.

 

Our Business

 

We are a medical device Company planning to commercialize our Bioelectrical Signal Therapy device (“BST Device,” or “Device”). Our BST Device treats wounds via electrical stimulation, which is believed to result in accelerated wound healing by imitating the natural electrical current that occurs in injured skin on the human body. Our BST Device stimulates renewed blood flow and oxygen in order to induce local cell regeneration and therefore promote wound healing. Our mission is to improve non-invasive wound care treatments and to become a leading provider of non-invasive wound and ulcer healing treatment. Our device is designed to specifically address many of the limitations associated with other invasive and non-invasive wound care devices.

 

We believe our BST Device is a simple and effective wound heal method that can be used in and incorporated as an adjunctive therapy in wound healing. Treatment is safe, effective, and well-tolerated.

 

Our BST Device has the Communaute Europeenne (“CE”) mark and is approved to be sold in the EU market. We are planning to initiate a FDA clinical trial for the purpose of obtaining approval from the United States Food and Drug Administration (the “FDA”), which we reasonably believe should commence in the third quarter of 2020. We expect the costs related to this clinical trial to be approximately $1.8 million. We estimate that the initial phase of the first 10 patients (out of 90) to cost $200K.

 

The Company’s success greatly depends upon the successful FDA clinical trial of its BST Device as well as our ability to raise sufficient equity capital. We successfully completed a Units Rights Offering in 2019. The Device may need additional development and there can be no assurance that we will, in fact, achieve the requisite safety and efficacy, prerequisites for FDA approval and/or that FDA approval will be received in a timely manner, if at all. Nevertheless, the Company believes that its BST Device’s design and procedure is safe and effective, but the path to commercial success in the US, even if FDA approval is granted, may take more time and may be more costly that we expect or for which we have sufficient resources at the present.

 

Our BST Device is designed to treat chronic wounds – primarily Stage III and Stage IV ulcers, which we believe comprises about 11% and 7% of all chronic wounds, respectively, and severe Stage II wounds.

 

Our anticipated plan to be able to sell the BST Device commercially in the United States, assuming success in our FDA approval process, is not expected before the end of 2020. We have not generated any sales revenues from our BST Device to date other than the payment of US$40,000 we have received from Colombia in January 2018 representing an initial order for our BST Device.

 

Recent Developments

 

During the first quarter of fiscal 2020, we were granted approval from the Helsinki committee to launch a Randomized Control Study (RCT) on 60-100 patients in order to assess the efficacy of the BST Device on diabetic foot patients in collaboration with Clalit Health Services Organization, Israel’s largest HMO, and the Israeli Ministry of Health (MOH). The study will be performed in 3-5 sites including leading clinics and hospitals in Israel. The Company intends to enroll the first patients to the study during the first quarter of 2020 and expects the trial to be conducted for 12-18 months until completion.

 

3
 

 

The Company has concluded a 35-wound, one arm clinical pilot, treating recalcitrant wounds in a leading wound clinic in Tel Aviv Israel, with 78% of the treated wounds completely healed within 20 weeks (Avg. wound duration at the base was 8 months) and an additional 16% of the treated wounds reaching wound area reduction of greater than 75%. Only 6% of the patients had no substantial positive clinical effect.

 

The Company’s distributor in Colombia, TekMedica SAS, has successfully concluded a clinical pilot study at the Hospital de la Samaritana in Bogota, Colombia. Starting in January 2020, Colsanitas, a leading Colombian HMO/Health insurance provider and operator of comprehensive healthcare services in Colombia and a member of the Sanitas group worldwide, will commence a clinical pilot study which is expected to be concluded by the end of the first half of 2020. If positive results are achieved, similar to those achieved in the Tel Aviv clinical trials, the Company believes that it will contribute to the penetration of the BST device treatment with Colsanitas health services in Colombia.

 

During the year ended December 31, 2018, the Company raised $1,795,147 from a rights offering of a total of 9,555,468 Units at $0.10 per Unit, each consisting of: (i) one share of Common Stock; (ii) one Class A Warrant exercisable for a period of 24 months to purchase ½ share of Common Stock at the equivalent of $0.50 per share; and (iii) one Callable Class B Warrant exercisable for a period of 36 months to purchase ½ share of Common Stock at the equivalent of $1.25 per share. The Company intends to use the proceeds of the rights offering for general corporate purposes, including working capital, capital expenditures, as well as acquisitions and other strategic purposes. The warrants fair value is $408,093 and were valued using a Black- Scholes valuation model.

 

On February 20, 2017, the Registrant received the official certification from the Israeli Ministry of Health authorizing the use of the Registrant’s BST Device in Israel. The BST Device implements patented and proprietary electrical stimulation technologies to treat hard-to-cure wounds and ulcers up to complete closure and/or cure.

 

On January 8, 2017, the Registrant entered into a five-year distribution agreement (the “Distribution Agreement”) with TekMedica SAS, organized under the laws of Colombia (“TekMedica” or the “Distributor”). Pursuant to the Distribution Agreement, the Registrant granted TekMedica the exclusive rights to distribute the Registrant’s medical device for the treatment of chronic wounds (the “BST Device™”) and the accompanying disposable electrodes (sometimes collectively, the “Products”) in Colombia (the “Territory”).

 

The Distribution Agreement provides that Registrant will provide Distributor with supplies of the BST Devise and disposable electrode for treatment of patients in hospitals, long-term care facilities, medical centers and out-patient clinics. The Distributor will make an initial advance payment to be applied against the first year’s quota together with an initial order supported by a Letter of Credit with subsequent orders as part of the quota, as set forth in the Distribution Agreement, with minimum annual quota’s during the five-year term. The Distributor will be responsible for securing any product certification, permit, license or approval that may be required in the Territory for the marketing, sale, sublicensing and delivery and use of the BST Devise and Products in the Territory.

 

Our Wound Healing Strategy

 

The objective of our BST Device is to reduce healing time and allow patients to receive treatment at home while delivering optimal therapeutic results, which eventually should result in significantly higher healing rates along with lower wound treatment costs presently available on the market.

 

The costs associated with untreated and/or unhealed wounds are far in excess of the costs of the physician, hospital and medical equipment, particularly when there are subsequent complications that require additional medical treatment which are virtually certain to occur as a result of untreated and/or unhealed wounds in a patient.

 

The healing time of chronic wounds usually ranges from a few weeks to up to several months depending on the size and type of the wound and the patient’s medical condition. Wound treatment typically can involve many direct and indirect costs. Wound dressings comprise only 10-15% of the total direct treatment cost according to the International Committee of Wound Management. In contrast, a significant percentage of the total cost is attributable to care providers’ salaries and staff expenses. As a result, treatment methods that reduce healing time to closure of the wound and reduce staff time inevitably lead to lower cost of care.

 

We believe that our BST Device is a very effective and cost-saving method for the chronic wound treatment market. Our belief is based on the knowledge and experience of our management in the wound care industry that our BST Device is designed to be able to significantly lower treatment cost compared to other wound therapies modalities due to the fact that our wound heal method requires shorter healing times, treatment can be easily given at patient homes and therefore reduce per day treatment costs.

 

Marketing and Sales

 

The Company intends to launch marketing efforts in the US assuming receipt of FDA approval which we anticipate at the end of 2022, of which there can be no assurance. Until such time, most of our efforts will be related to internally preparing for the launch of our BST Device in the US as well as proceeding with marketing efforts in the EU, Colombia, Argentina and a few other territories.

 

Assuming FDA approval, which we reasonably believe can be achieved by end of 2022 based, in part, because of the approval that our BST Device has received in Europe. The Company plans to indirectly sell its wound treatment solution by entering into distribution agreements with distributors specializing in wound care therapy solutions or by creating its own sales and marketing force. The distributors or the Company will then sell the treatment to hospitals, nursing homes, geriatric institutions and private wound care clinics.

 

4
 

 

In addition to indirect sales through distribution agreements, the Company considers the outright sale of its treatment to each institution such as hospitals, nursing homes, geriatric institutions, and private clinics, which would rent the Device to their patients on a monthly basis. Upon completion of the wound healing treatment, the patient would return the Device, which would then re-enter the medical device rental market.

 

Competition

 

Our principal competition in the chronic wound care market are expected to be the wound care products manufactured by Acelity (formerly known as KCI) and Smith & Nephew. Acelity is considered a market leader and, we believe, commands a market share of approximately 21% in the United States. Smith & Nephew’s U.S. market share is believed to be approximately 19% based on revenues. Other significant competitors are ConvaTec, Johnson & Johnson and others, all manufacturers of wound healing devices.

 

We also face competition from numerous companies that offer a variety of wound healing methods including traditional wound care dressings, advanced wound care dressings, such as hydrogels, hydrocolloids, and alginates, skin substitutes, and products containing growth factors. While many of these methods compete with our BST Device, such methods can also be utilized as complementary therapies to our BST Device and V is versa.

 

We believe that the following treatments or therapies represent alternatives or complementary treatments and/or therapies to our BST device:

 

Hyperbaric oxygen therapy (“HBOT”): Hyperbaric oxygen therapy is a medical treatment that utilizes pressurized oxygen to heal wounds. The treatment is administered by placing a patient in a comfortable pressure chamber that circulates oxygen at two to three times the atmospheric pressure rate. The HBOT method is not specifically designed for chronic wounds and the treatment process is both very long and very expensive. HBOT treatments typically last 90-120 minutes and are administered 1-2 times a daily for a period of 5 to 6 days a week. The length of treatment depends on the wound’s severity, with some patients requiring 20-40 treatments. There are many companies that offer HBOT treatment in clinics as a direct service to patients.

 

Vacuum-assisted closure (“V.A.C.”) method: The V.A.C. method is designed for the treatment of acute care setting, serious trauma wounds, failed surgical closures, amputations, and serious pressure ulcers. The leading V.A.C. product was launched in 1995 by KCI, a major global medical technology company, recently acquired by Acelity.

 

EZCARE (Smith & Nephew) - Following the acquisition of BlueSky Medical in May 2007, Smith & Nephew provide negative pressure wound therapy (NPWT). NPWT is a technology used to treat chronic wounds such as diabetic ulcers, pressure ulcers, as well as post-operative and hard-to-heal wounds. It aids in the healing of open wounds by the application of sub-atmospheric pressure (Similar technology to KCI).

 

In addition, recently developed technologies, or technologies that may be developed in the future, are or may be the basis for products which compete with our BST Device. There can be given no assurance that we will be able to successfully enter into the chronic wound heal market with our BST Device or that we will be able to compete effectively against such companies in the future.

 

Many of these companies have substantially greater capital and marketing resources, and greater experience in commercializing products and services than we have.

 

Patents, Trademarks, and Copyrights

 

The Company has filed a provisional patent with United States Patent and Trademark Office for the purpose of protecting the main features of our proprietary unique electrical healing signal BST Device. We have a list of all pending and granted patents to date attached as exhibit 10.9 to our S-1 Registration Statement as filed with the Company’s S-1 on September 6, 2014.

 

To the extent that we determine that additional intellectual property (“IP”) protection may be necessary, we plan to secure such protection by applying for additional patents, trademarks or copyrights related to our business and IP, as we deem necessary.

 

Government Regulation

 

Our operations and the marketing of our BST Device is subject to extensive regulation by numerous federal and state governmental authorities in the United States, foremost of which is the FDA. There can be no assurance that the FDA, other governmental agencies or a third party will not contend that certain aspects of our business and our BST Device is either subject to or is not in compliance with applicable laws, regulations or rules or that the state or federal regulatory agencies or courts would interpret such laws, regulations and rules in our favor. The sanctions for failure to comply with such laws, regulations or rules could include denial of the right to conduct business, significant fines and criminal and civil penalties. Additionally, any increase in the complexity or substantive requirements of such laws, regulations or rules could have a material adverse effect on our business.

 

Any change in current regulatory requirements or related interpretations by or positions of, state officials where we operate could adversely affect our operations within those states. State regulatory requirements could adversely affect our ability to establish operations in such other states.

 

5
 

 

Timeline and Estimated Costs for Regulatory FDA Approval of Our BST Device

 

We expect FDA approval of our BST Device at the end of 2021 after total costs and expenses of approximately $1.5 million. We have received Investigative Device Exemption (IDE) approval from the FDA which involved a lengthier process and are currently preparing to commence our clinical trial in the U.S. To that end, we have engaged IMARC Research Inc., a leading clinical research organization located in Ohio, to conduct our Randomized Control Trial (RCT) based upon a monthly payment schedule with payments determined by the amount of work provided, the number of patients enrolled to the study and the expenses incurred IMARC during the RCT.

 

Based upon our current estimations, which we believe are based on sound business analysis after consultation with IMARC, we expect that we should be able to complete: (i) the first phase of the RCT with 10 patients by the end of Q4 2020; and (ii) the second phase of the RCT with 80 patients by the end of Q2 2021, depending on patient enrollment rate. We will incur fixed costs during the RCT and additional costs paid to IMARC and other service providers based upon the time devoted during the RCT process.

 

Various state and federal laws apply to the operations of medical device providers including, but are not limited to, the following:

 

Licensing Requirements: Certain medical device providers are required to be licensed by various state regulatory bodies. However, if we are found to not be in compliance, we could be subject to fines and penalties or ordered to cease operations which could have an adverse effect on our business.

 

False Claims Act: The Federal False Claims Act and some state laws impose requirements in connection with the submission of claims for payment for health care services and products, including prohibiting the knowing submission of false or fraudulent claims and submission of false records or statements for reimbursement and payment to the United States government or state government. Such requirements would apply to the hospitals to which we provide our Device related to wound care treatment services. Not only are government agencies active in investigating and enforcing actions with respect to applicable health laws, but also health care providers are often subject to actions brought by individuals on behalf of the government. As such, “whistleblower” lawsuits, also known as “qui tam” actions, are generally filed under seal with a court to allow the government adequate time to investigate and determine whether it will intervene in the action. As a result, health care providers subject to qui tam actions are often unaware of the lawsuit until the government has made its determination whether to intervene, or not, at which time the seal is lifted. The Federal False Claims Act provides for penalties equal to three (3) times the actual amount of any overpayments plus $11,000 per claim. Under legislation passed in 2009, those who bill third parties are now obligated to discover and disclose any overpayments received or be subject to False Claims Act penalties as well.

 

Fraud and Abuse Laws: Since a significant portion of reimbursement for healthcare products and services are currently paid through reimbursements under Medicare, Medicaid or similar programs, the federal government and many states have adopted statutes and regulations that address fraudulent and/or abusive behavior in connection with such programs.

 

As part of this regulatory scheme, the federal government believes that an “inducement” to refer a Medicare or Medicaid patient is likely to result in fraud or abuse on the Medicare or Medicaid programs. Therefore, the federal government adopted a number of laws and regulations to recoup funds and assess penalties which it believes were paid inappropriately. In cases of criminal fraud, the individuals responsible for the fraudulent activity can be subject to imprisonment.

 

One of the principal federal statutes regulating fraud and abuse is the Anti-Kickback Statute. The Anti-Kickback statute prohibits the solicitation, payment, receipt or offering of any direct or indirect remuneration in exchange for the referral of Medicare and Medicaid patients or for the purchasing, arranging for or recommending the purchasing, leasing or ordering of Medicare or Medicaid covered services, items or equipment. To be convicted of a violation of the Anti-Kickback Statute, the party must have had specific intent to induce the referral of Medicare or Medicaid patients or the purchase, lease or ordering of a good, item or service reimbursable by Medicare or Medicaid. Some of the federal courts have broadly construed the Anti-Kickback Statute and held that the “intent” required to support a criminal conviction will exist if only one purpose of the referral is to induce a prohibited referral.

 

To clarify some of the issues created by the Anti-Kickback Statute, the Center for Medicare and Medicaid Services issued “safe harbor” regulations identifying actions which will not be deemed to violate the Anti-Kickback Statute. Some of these “safe harbors” are in the area of joint ventures, personal services, and other arrangements. Conducting an activity that falls within a “safe harbor” regulation provides comfort that such activity will not be prosecuted. Compliance with each element of a particular “safe harbor” is required in order to assured of the protection provided by such “safe harbor”. Even though a transaction that does not fall within a “safe harbor” may be perfectly appropriate, the arrangement will be evaluated based on its facts and circumstances to determine if the parties intended to induce the referral of Medicare or Medicaid patients or the purchase, lease or ordering of a good, item or service reimbursable under Medicare or Medicaid.

 

An allegation of violation and/or a conviction for violation of the Anti-Kickback Statute and parallel state laws could have a significant impact on our ability to conduct our business. As noted earlier, significant fines, penalties, exclusion from Medicare and Medicaid programs and imprisonment of individuals can result. Because the burden to prove specific intent under the Anti-Kickback Statute can sometimes be difficult, the government has been pursuing enforcement under statutes that do not require specific intent such as the False Claims Act. In fact, in recent legislation the Congress has required that those submitting claims for third party reimbursement are required to discover and repay any overpayments, or they are subject to additional penalties.

 

The Stark Law: Federal and some state laws prohibit physician referrals to an entity in which the physician or his or her immediate family members have a financial interest for provision of certain designated health services that are reimbursed by Medicare or Medicaid. We cannot assure you that the federal government, or other states in which we operate, will not enact similar or more restrictive legislation or restrictions or interpret existing laws and regulations in a manner that could harm our business.

 

6
 

 

Health Care Reform: There are currently a number of legislative proposals that have been proposed as health care reform in the United States Congress. At this time, it is not clear which, if any, of these proposals will be enacted. Therefore, although one or more of these proposals, if enacted, could have an impact on our business, we cannot predict at this time what that impact will be until there is legislation that becomes law.

 

Ongoing Investigations: Federal and state investigations and enforcement actions continue to focus on the health care industry, scrutinizing a wide range of items such as joint venture arrangements and referral and billing practices. We believe planned activities will be substantially in compliance with applicable legal requirements. We cannot assure you, however, that a governmental agency or a third party will not contend that certain aspects of our business are subject to, or are not in compliance with, such laws, regulations or rules, or that state or federal regulatory agencies or courts would interpret such laws, regulations and rules in our favor, or that future interpretations of such laws will not require structural or organizational modifications of our business or have a negative impact on our business. Applicable laws and regulations are very broad and complex, and, in many cases, the courts interpret them differently, making compliance difficult. Although we try to comply with such laws, regulations and rules, a violation could result in denial of the right to conduct business, significant fines and criminal penalties. Additionally, an increase in the complexity or substantive requirements of such laws, regulations or rules, or reform of the structure of health care delivery systems and payment methods, could have a material adverse effect on our business.

 

Employees

 

We presently have one full-time employee, which is our CEO, Ohad Goren. Our CFO, Gal Peleg, dedicates 25% of his professional time to our business and Itsik Ben Yesha, our CTO, dedicates 50% of his professional time to our business. Our CEO, CTO and CFO are employed under separate service agreements with the Company.

 

ITEM 1A. RISK FACTORS

 

This Annual Report on Form 10-K contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, the market in which we operate, our beliefs and our management’s assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expects”, “anticipates”, “targets”, “goals”, “projects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict or assess. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements.

 

Risks Related to Our Business

 

Our Independent Registered Public Accounting Firm Has Expressed Substantial Doubt As To Our Ability To Continue As A Going Concern.

 

The audited financial statements included in the Registration Statement have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result if we cease to continue as a going concern. We believe that in order to continue as a going concern, including the costs of being a public company, we will need approximately $50,000 per year simply to cover the administrative, legal and accounting fees. We have incurred significant losses since our inception. We have funded these losses primarily through the sale of restricted shares of our Common Stock and the issuance of convertible notes, which have subsequently been converted into restricted shares of Common Stock.

 

Based on our financial history, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company that has generated no revenue.

 

Notwithstanding our success in funding our business from the sale of equity and debt securities to date, there can be no assurance that we will have adequate capital resources or be able to continue to raise equity and/or debt capital to fund planned operations or that any additional funds will be available to us when needed or at all, or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our plan of operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

 

The outbreak of the novel strain of coronavirus, SARS-CoV-2, which causes COVID-19, could adversely impact our business, including our preclinical studies and clinical trials.

 

Public health crises such as pandemics or similar outbreaks could adversely impact our business. In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019 (“COVID-19”), surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including Israel and the United States.

 

As a result of the COVID-19 outbreak, or similar pandemics, we have and may in the future experience disruptions that could severely impact our business, preclinical studies and clinical trials, including:

 

  delays or difficulties in enrolling patients in our clinical trials;
  delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

 

7
 

 

  delays or disruptions in non-clinical experiments due to unforeseen circumstances at contract research organizations and vendors along their supply chain;
  increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19, being forced to quarantine, or not accepting home health visits;
  interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures (particularly any procedures that may be deemed non-essential), which may impact the integrity of subject data and clinical study endpoints;
  interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact approval timelines;
  limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people, an increased reliance on working from home or mass transit disruptions.

 

These and other factors arising from the COVID-19 pandemic could worsen in countries that are already afflicted with COVID-19, could continue to spread to additional countries, or could return to countries where the pandemic has been partially contained, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.

 

As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. The COVID-19 outbreak continues to rapidly evolve. The extent to which the outbreak may impact our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines or lock-downs in Israel and the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in Israel and the United States and other countries to contain and treat the disease.

 

We Have Limited Operating History And Face Many Of The Risks And Difficulties Frequently Encountered By Start-Up Companies.

 

In January 2014, the Company acquiring certain patents pertaining to a wound healing device. The Company’s new plan of operation has not yet generated any revenues. We have no operation history as a medical device company upon which an evaluation of the Company and its prospects could be based. There can be no assurance that management of the Company will be successful in commercially exploiting our wound healing device and implementing the corporate infrastructure to support its new operations so that the Company will generate sufficient revenues to meet its expenses or to achieve or maintain profitability.

 

If we are unable to raise sufficient capital as needed, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results, or cease our operations entirely, in which case, you will lose all your investment.

 

If The Clinical Trial Studies Of Our Current Patented Device Does Not Produce Results Necessary To Support Regulatory Clearance Or Approval In The United States, We Will Be Unable To Commercialize Our Device.

 

We have engaged a third party to conduct clinical trials and we reasonably expect trial results in 2019. Clinical testing may be expected to take a significant amount of time, is expensive and carries uncertain outcomes. The initiation and completion of the trial study may be prevented, delayed, or halted for numerous reasons, including, but not limited to, the following:

 

● the FDA, institutional review boards or other regulatory authorities do not approve a clinical study protocol, force us to modify a previously approved protocol, or place a clinical study on hold;

● patients do not enroll in, or enroll at a lower rate than we expect, or do not complete a clinical study;

● patients or investigators do not comply with study protocols;

● patients do not return for post-treatment follow-up at the expected rate;

● patients experience serious or unexpected adverse side effects for a variety of reasons that may or may not be related to our product causing a clinical trial study to be put on hold;

● sites participating in an ongoing clinical study withdraw, requiring us to engage new sites;

● difficulties or delays associated with establishing additional clinical sites;

● third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule, or act in ways inconsistent with the investigator agreement, clinical study protocol, good clinical practices, and other FDA and Institutional Review Board requirements;

● third-party entities do not perform data collection and analysis in a timely or accurate manner;

● regulatory inspections of our clinical studies require us to undertake corrective action or suspend or terminate our clinical studies;

● changes in federal, state, or foreign governmental statutes, regulations or policies;

● interim results are inconclusive or unfavorable as to immediate and long-term safety or efficacy; or

● the study design is inadequate to demonstrate safety and efficacy.

 

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Clinical trial failure can occur at any stage of the testing. Our clinical study may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or non-clinical testing in addition to those we have planned. Our failure to adequately demonstrate the safety and efficacy of our device would prevent receipt of regulatory clearance or approval and, ultimately, the commercialization of that device or indication for use. Any of these occurrences may harm our business, financial condition and prospects significantly.

 

Our Expected Revenue Will Be Generated From Our Sole Product, And Any Decline In The Future Sales Of This Product Or Failure To Gain Market Acceptance Of This Product Will Negatively Impact Our Business.

 

We expect our revenue to be derived entirely from sales of our wound healing Device for the foreseeable future. If we are unable to achieve and maintain market acceptance of our product and do not achieve sustained positive cash flow, we will be severely constrained in our ability to fund our operations, fulfill our business plan and be able to possibly develop and commercialize other potential products. In addition, if we are unable to market our product as a result of a quality problem, failure to maintain or obtain regulatory approvals, unexpected or serious complications or other unforeseen negative effects related to our product or the other factors discussed in these risk factors, we would lose our only potential source of revenue, and our business will be materially adversely affected.

 

If We Fail To Develop And Retain Our Sales Force, Our Business Could Suffer.

 

We plan to develop a direct sales force in the United States. As we launch our product, assuming that we are successful in securing FDA approval, any efforts to increase our marketing efforts and expand into new geographies will be dependent on our ability to hire and retain, as well as grow and develop our sales personnel. We intend to make a significant investment in recruiting and training sales representatives. There is significant competition for sales personnel experienced in relevant medical device sales. Once hired, the training process may be expected to be lengthy because it requires significant education for new sales representatives to achieve the level of competency with our product and meet the expectations of potential clients. Upon completion of the training, and any previous experience in marketing medical devices, generally, our sales representatives typically require lead time in the field to grow their network of accounts and achieve the productivity levels we expect them to reach in any individual territory. If we are unable to attract, motivate, develop and retain a sufficient number of qualified sales personnel, and if our sales representatives do not achieve the productivity levels we expect them to reach, our revenue will not grow at the rate we expect and our financial performance will suffer. Also, to the extent we hire personnel from our competitors, we may have to wait until applicable non-competition provisions have expired before deploying such personnel in restricted territories or incur costs to relocate personnel outside of such territories, and we may be subject to allegations that these new hires have been improperly solicited, or that they have divulged to us proprietary or other confidential information of their former employers.

 

If We Are Unable To Educate Physicians On The Safe And Effective Use Of Our Product, We May Be Unable To Achieve Our Expected Growth.

 

An important part of our sales process will include the education of physicians on the safe and effective use of our wound healing device. There is a learning process for physicians to become proficient in the use of our product and, based upon the use of our Device in Europe, it typically takes several procedures for a physician to become comfortable using the device. If a physician experiences difficulties during an initial procedure or otherwise, that physician may be less likely to continue to use our product, or to recommend it to other physicians. It is critical to the success of our commercialization efforts to educate physicians on the proper use of the device, and to provide them with adequate product support during training. It is important for our expected growth that these physicians advocate for the benefits of our product in the broader marketplace. If physicians are not properly trained, they may misuse or ineffectively use our product. This may also result in unsatisfactory patient outcomes, negative publicity or lawsuits against us, any of which could have a material adverse effect on our business.

 

There May Not Be A Wide Enough Client Base To Sustain Our Business.

 

The Company’s principal business is to engage in marketing and selling its wound healing treatments with our device. The Company hopes to sell its wound healing device treatments in numbers large enough to make its business model work for profitability, of which there can b no assurance.

 

If We Are Unable To Protect Our Intellectual Property, Our Business Will Be Negatively Affected.

 

The market for medical devices is subject to frequent litigation regarding patent and other intellectual property rights. It is possible that our device may not withstand challenges made by others or that our patents protect our rights adequately.

 

Our success depends in large part on our ability to secure and maintain effective patent protection for our product in the United States and internationally. We have acquired patents that have been granted as well as patents pending and expect to continue to file patent applications for various aspects of our device technology. However, we face the risks that:

 

● we may fail to secure necessary patents on our patents pending prior to or after obtaining regulatory clearances, thereby permitting competitors to market competing products; and

● our already-granted patents may be re-examined, invalidated or not extended.

 

If we are unable to protect our intellectual property adequately, our business and commercial prospects will suffer.

 

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We May Be Accused Of Infringing Intellectual Property Rights Of Third Parties.

 

Other parties may claim that our Device infringes on their proprietary rights. We may be subject to claims and legal proceedings regarding alleged infringement by us of the intellectual property rights of third parties. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, legal fees, injunctions or the payment of damages. In the event that our patents do not fully protect us, we may need to obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all. In addition, we may not be able to obtain or utilize on terms that are favorable to us, or at all, licenses or other rights with respect to intellectual property we do not own.

 

We May Face Product Liability Claims That Could Result In Costly Litigation And Significant Liabilities.

 

Marketing of our device and clinical testing of our product may expose us to product liability and other tort claims. Although we intend to purchase and maintain product liability insurance, the coverage limits of our policies may not be adequate and one or more successful claims brought against us may have a material adverse effect on our business and results of operations. Additionally, product liability claims could negatively affect our business reputation, adversely impacting continued product sales as well as our ability to obtain and maintain regulatory approval for our products.

 

Current Or Future Government Regulations May Add To Our Operating Costs.

 

We may face unanticipated increases in operating costs because of any changes in governmental regulations related to our wound healing Device, specifically, and/or medical devices, generally. We have no assurance that the independent clinical trials will result in favorable data that will be accepted by the FDA. Laws and regulations may be introduced and court decisions may be rendered that materially affect the demand for our product. Complying with new regulations and/or court decisions could increase our operating costs. Furthermore, we may be subject to the laws of various jurisdictions where we actually conduct business. Our failure to qualify to do business in a jurisdiction that requires us to do so could subject us to fines or penalties and could have a material adverse impact on our business and operations.

 

We Are Required To Comply With Medical Device Reporting, Or MDR, Requirements And Must Report Certain Malfunctions, Deaths And Serious Injuries Associated With Our Device Which Can Result In Voluntary Corrective Actions, Mandatory Recall Or Agency Enforcement Actions.

 

Under applicable FDA MDR regulations, medical device manufacturers are required to submit information to the FDA when they receive a report or become aware that a device has or may have caused or contributed to a death or serious injury or has or may have a malfunction that would likely cause or contribute to death or serious injury if the malfunction were to recur. All manufacturers placing medical devices on the market in the European Economic Area and the United States are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the regulatory agency, or Competent Authority, in whose jurisdiction the incident occurred.

 

Malfunction of our wound healing Device could result in future voluntary corrective actions, such as recalls, including corrections, or customer notifications, or agency action, such as inspection or enforcement actions. If malfunctions do occur, we may be unable to correct the malfunctions adequately or prevent further malfunctions, in which case we may need to cease manufacture and distribution of the affected products, initiate voluntary recalls, and redesign the products. Regulatory authorities may also take actions against us, such as ordering recalls, imposing fines, or seizing the affected products. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.

 

We May Be Subject To Federal, State And Foreign Healthcare Laws And Regulations, And A Finding Of Failure To Comply With Such Laws And Regulations Could Have A Material Adverse Effect On Our Business.

 

Our operations are, and will continue to be, directly and indirectly affected by various federal, state or foreign healthcare laws, including, but not limited to, those described below. In particular, we are subject to the federal Anti-Kickback Statute, which prohibit, among other things, any person or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, in cash or in kind, in return for or to induce the referring, ordering, leasing, purchasing or arranging for or recommending the referring, ordering, purchasing or leasing of any good, facility, item or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as the Medicare and Medicaid programs.

 

We are also subject to the federal HIPAA statute, which, among other things, created federal criminal laws that prohibit knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any health care benefit program or making any materially false, fictitious or fraudulent statements relating to health care matters.

 

We are also subject to the federal “sunshine” law, which requires us to track and report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to “payments or other transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals and to report annually to CMS ownership and investment interests held by physicians, as defined above, and their immediate family members in our company so long as it is privately held.

 

In addition, we are subject to the federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, persons or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim to, or the knowing use of false records or statements to obtain payment from, or approval by, the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers”, may share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim.

 

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Many states have also adopted laws similar to each of the above federal laws, such as anti-kickback and false claims laws which may be broader in scope and apply to items or services reimbursed by any third-party payor, including commercial insurers, as well as laws that restrict our marketing activities with physicians, and require us to report consulting and other payments to physicians. Some states mandate implementation of compliance programs to ensure compliance with these laws. We also are subject to foreign fraud and abuse laws, which vary by country.

 

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental health care programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

 

Our Future Success Is Dependent, In Part, On The Performance And Continued Service Of Ohad Goren and Itsik Ben Yesha, Our Chief Executive Officer and Chief Technology Officer.

 

The Company will be dependent on its key executives, Ohad Goren and Itsik Ben Yesha, our CEO and CTO, respectively, for the foreseeable future. The loss of the services from either one could have a material adverse effect on the operations and prospects of the Company. They are expected to handle all aspects of our medical device business and manage our operations. Their responsibilities include developing business arrangements, directing the development of the Company’s technology and IP, overseeing technical aspects of our business, regulations and formulating strategies and materials to be used during our presentations and meetings. At this time, the Company does not have an employment agreement with either Mr. Goren or Ben Yesha, though the Company may enter into such an agreement with Mr. Goren, its CEO and Mr. Ben Yesha, its CTO, on terms and conditions usual and customary in our industry. The Company does not currently have “key man” life insurance on neither Mr. Goren, Mr. Ben Yesha nor on Mr. Ron Weissberg, our Chairman and control shareholder.

 

We Operate In A Highly Competitive Industry And Compete Against Several Large Companies Which Could Adversely Affect Our Ability to Succeed.

 

There are numerous established companies that offer wound healing products including products from Kinetic Concepts, Inc. and Smith & Nephew, which have far greater financial and other resources and far longer operating histories than we do. We are a new entry into this competitive market and may struggle to differentiate ourselves as a viable competitor whose wound healing Device provides more value and efficacy than the competition.

 

We Are An “Emerging Growth Company” Under The Recently Enacted Jobs Act And We Cannot Be Certain If The Reduced Disclosure Requirements Applicable To Emerging Growth Companies Will Make Our Common Stock Less Attractive To Investors.

 

We qualify as an “emerging growth company” under the recently enacted JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, among other things, we will not be required to:

 

● have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

● submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency”;

● obtain shareholder approval of any golden parachute payments not previously approved; and

● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation.

 

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “Emerging Growth Company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We will remain an “Emerging Growth Company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion; (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

 

Until such time, however, because the JOBS Act has only recently been enacted, we cannot predict whether investors will find our stock less attractive because of the more limited disclosure requirements that we may be entitled to follow and other exemptions on which we are relying while we are an “emerging growth company”. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

 

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Our By-Laws Provide For Indemnification Of Our Directors And the Purchase Of D&O Insurance At Our Expense And Limit Their Liability Which May Result In A Major Cost To Us And Hurt The Interest Of Our Shareholders Because Corporate Resources May Be Expended For The Benefit Of Our Directors.

 

The Company’s By-Laws include provisions that eliminate the personal liability of the directors of the Company for monetary damages to the fullest extent possible under the laws of the State of Delaware or other applicable law. These provisions eliminate the liability of directors to the Company and its stockholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care. Under Delaware law, however, such provisions do not eliminate the personal liability of a director for (i) breach of the director’s duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper benefit. These provisions do not affect a director’s liabilities under the federal securities laws or the recovery of damages by third parties.

 

Reporting Requirements Under The Exchange Act And Compliance With The Sarbanes-Oxley Act Of 2002, Including Establishing And Maintaining Acceptable Internal Controls Over Financial Reporting, Are Costly And May Increase Substantially.

 

The rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which will require that the Company engage legal, accounting, auditing and other professional services. The engagement of such services is costly. Additionally, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that we design, implement and maintain adequate internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have may make it difficult for us to design, implement and maintain adequate internal controls over financial reporting. We expect these costs to be approximately $50,000 per year. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports or report fraud, which may harm our overall financial condition and result in loss of investor confidence and a decline in our share price.

 

As a public company, we may be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “Emerging Growth Company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.

 

We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, we anticipate that the expenses that will be required for being a public company could be material. We estimate that the aggregate cost of increased legal services; accounting and audit functions; personnel, such as a chief financial officer familiar with the obligations of public company reporting; consultants to design and implement internal controls could be material. In addition, if and when we retain independent directors and/or additional members of senior management, we may incur additional expenses related to director compensation and/or premiums for directors’ and officers’ liability insurance, the costs of which we cannot estimate at this time. We may also incur additional expenses associated with investor relations and similar functions, the cost of which we also cannot estimate at this time. However, these additional expenses individually, or in the aggregate, may also be material.

 

In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

 

The increased costs associated with operating as a public company may decrease our operating performance, and may cause us increase the prices of our product to offset the effect of such increased costs. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.

 

Future Manufacturing Of Our Product May Be Interrupted Due To International Political Situations, Natural Disasters Or Other Causes.

 

Once FDA approval is granted, we plan to manufacture our BST Device principally in Israel. Domestic situations in Israel and surrounding countries could possibly result in production and delivery problems. We are subject to the risk that future manufacturing and delivery of our BST Device may be interrupted as a result of natural disasters or capacity constraints with our vendors’ or suppliers’ hardware. Any such interruptions may lead to a loss of customers or distributors and, accordingly, may adversely affect our business and results of operations.

 

Risks Related to Our Common Stock

 

There Is No Assurance Of A Liquid Public Market Of Our Common Stock Or That You May Be Able To Liquidate Your Investment In Our Common Stock.

 

At present, our Common Stock is subject to quotation of the OTCQB market. There is only a limited, liquid public trading marketing for our Common Stock and there can be no assurance that one will ever develop. Market liquidity will depend on the perception of our business and any steps that our management might take to bring us to the awareness of investors. There can be given no assurance that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business or the value of their initial investment in our Common Stock. As a result, holders of our securities may not find purchasers for our securities should they to decide to sell securities held by them. Consequently, our securities should be purchased only by investors who have no need for liquidity in their investment and who can hold our securities for a prolonged period of time.

 

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The Market Price Of Our Common Stock May Be Volatile.

 

In the event an active trading market develops for our Common Stock, the market price of our Common Stock may be highly volatile, as is the stock market in general, and the market for securities subject to quotation on OTCQB Markets in particular. Some of the factors that may materially affect the market price of our Common Stock are beyond our control, such as changes in conditions or trends in the industry in which we operate or sales of our Common Stock. These factors may materially adversely affect the market price of our Common Stock, regardless of our business performance. Public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These market fluctuations may adversely affect the market price of our Common Stock.

 

A Large Number Of Additional Shares Will Be Available For Resale Into The Public Market Pursuant To This Offering As Well As In The Near Future, Which May Cause The Market Price Of Our Common Stock To Decline Significantly, Even If Our Business Performs As Expected.

 

Sales of a substantial number of shares of our Common Stock in the public market pursuant to our Offerings, or the perception that additional shares of Common Stock become available pursuant to Rule 144 promulgated by the SEC under the Act, could adversely affect the market price of our Common Stock. As of April 13, 2020, we have 34,546,060 shares of Common Stock outstanding of which 21,420,321 shares of Common Stock are restricted as a result of applicable securities laws. As restrictions on resale expire, the market price could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. For a more detailed description, see “Shares Eligible for Future Sale.”

 

If holders of restricted securities sell a large number of shares pursuant to Rule 144 under the Act, they could adversely affect the market price for our Common Stock.

 

You Will Experience Dilution Of Your Ownership Interest Because Of The Future Issuance Of Additional Shares Of Our Common Stock Or Our Preferred Stock.

 

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are authorized to issue an aggregate of 500,000,000 shares of Common Stock, par value $0.00001 per share, of which 34,546,060 are currently outstanding.

 

We may also issue additional shares of our Common Stock or other securities that are convertible into or exercisable for Common Stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our Common Stock or other securities may have a negative impact on the market price of our Common Stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes or for other business purposes, including at a price (or exercise prices) below the price at which shares of our Common Stock will be quoted on the OTCQB Markets.

 

We May Never Pay Any Dividends To Our Shareholders.

 

We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any dividends in the foreseeable future, but will review this policy as circumstances dictate. The declaration and payment of all future dividends, if any, will be at the sole discretion of our board of directors, which retains the right to change our dividend policy at any time. Consequently, stockholders must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

 

Insider Will Continue To Have Substantial Control Over Us After This Offering and Will Be Able To Influence Corporate Matters.

 

Our directors and executive officers and stockholders holding more than 5% of our Common Stock and their affiliates will beneficially own, in the aggregate, approximately 30% of our outstanding Common Stock. As a result, if these stockholders were to choose to act together, they would be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us. For information regarding the ownership of our outstanding stock by our executive officers and directors and their affiliates, see “Security Ownership of Certain Beneficial Owners and Management.”

 

We cannot assure you that the interests of our management team will coincide with the interests of the investors. So long as our management team collectively controls a significant portion of our Common Stock, these individuals, or entities controlled by them, will continue to collectively be able to strongly influence or effectively control our decisions.

 

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Anti-Takeover Provisions Of The Delaware General Corporation Law May Discourage Or Prevent A Change Of Control, Even If An Acquisition Would Be Beneficial To Our Shareholders, Which Could Reduce Our Stock Price.

 

We are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including a merger, tender offer or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our Common Stock to decline.

 

State Blue Sky Registration, Potential Limitations On Resale Of Our Common Stock.

 

The holders of our shares of Common Stock and those persons, who desire to purchase our Common Stock in any trading market that might develop, should be aware that there may be state blue-sky law restrictions upon the ability of investors to resell our securities. Accordingly, investors should consider the secondary market our securities to be a limited one.

 

It is the present intention of management after the active commencement of operations in to seek coverage and publication of information regarding the Company in an accepted publication manual, which permits a manual exemption. The manual exemption permits a security to be distributed in a particular state without being registered if the Registrant issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuer’s officers, and directors, (2) an issuer’s balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. Furthermore, the manual exemption is a non-issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities.

 

Most of the accepted manuals are those published in Standard and Poor’s, Moody’s Investor Service, Fitch’s Investment Service, and Best’s Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.

 

Our Common Stock Is Considered A Penny Stock, Which May Be Subject To Restrictions On Marketability, So You May Not Be Able To Sell Your Shares.

 

We may be subject now and in the future to the Penny Stock rules if our shares of Common Stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.

 

In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any Offerings and reduce the trading activity for shares of our Common Stock. As long as our shares of Common Stock are subject to the penny stock rules, the holders of such shares of Common Stock may find it more difficult to sell their securities.

 

The Control Deficiencies In Our Internal Control Over Financial Reporting May Until Remedied Cause Errors in Our Financial Statements Or Cause Our Filings With The SEC To Not Be Timely.

 

We have identified control deficiencies in our internal control over financial reporting as of the evaluation done by management as of December 31, 2019, including those related to (i) absent or inadequate segregation of duties within a significant account or process, (ii) inadequate documentation of the components of internal control, and (iii) inadequate design of information technology general and application controls that prevent the information system from providing complete and accurate information consistent with financial reporting objectives and current needs. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our financial statements that could require a restatement or our filings may not be timely made with the SEC. Based on the work undertaken and performed by us, however, we believe the financial statements contained in our reports filed with the SEC are fairly stated in all material respects in accordance with GAAP for each of the periods presented. We intend to implement additional corporate governance and control measures to strengthen our control environment as we are able, but we may not achieve our desired objectives. We may identify material weaknesses and control deficiencies in our internal control over financial reporting in the future that may require remediation and could lead investors losing confidence in our reported financial information, which could lead to a decline in our stock price.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. DESCRIPTION OF PROPERTIES

 

Our principal executive office is located at 20 West 64th Street, Suite 39G, New York, NY 10023. Our telephone number is (972) 54-427777, which is the telephone of the offices of our Chairman, Ron Weissberg, located in Israel. There is no lease on the premises the Company is occupying and the Company is not responsible for paying rent. We are not generating sufficient revenue at this time to justify a separate corporate office. Once our business grows and generates revenue, we will look for more office space in a separate corporate office.

 

ITEM 3. LEGAL PROCEEDING

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTER

 

Market Information

 

The Company’s Common Stock is subject to quotation on the OTCQB Market under the symbol “EQUR”. There is currently no active trading market in the Common Stock on the OTC market. There can be no assurance that there will be an active trading market for the Common Stock once the Company becomes a reporting company under the Exchange Act. In the event that an active trading market commences, there can be no assurance as to the market price of the shares of Common Stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained.

 

For the periods indicated, the following table sets forth the high and low bid prices per share of Common Stock. The below prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions but does reflect the price of our Common Stock adjusted for the reverse split.

 

    Fiscal 2019     Fiscal 2018     Fiscal 2017  
    High     Low     High     Low     High     Low  
First Quarter ended March 31   $ 0.08     $ 0.06     $ 0.51     $ 0.10     $ 0.51     $ 0.10  
Second Quarter ended June 30   $ 0.17     $ 0.06     $ 0.23     $ 0.10     $ 0.23     $ 0.10  
Third Quarter ended September 30   $ 0.10     $ 0.06     $ 0.15     $ 0.05     $ 0.15     $ 0.05  
Fourth Quarter ended December 31   $ 0.10     $ 0.06     $ 0.08     $ 0.04     $ 0.08     $ 0.04  

 

Holders of Capital Stock

 

We have 250 holders of record of our Common Stock. This does not include an indeterminate number of persons who hold our Common Stock in brokerage accounts and otherwise in “street name.”

 

Rule 144 Shares

 

As of the date of this annual report, there were 21,420,321 shares of our Common Stock that are currently available for sale to the public in accordance with the volume and trading limitations of Rule 144.

 

Stock Option Grants

 

On January 1, 2015, the board of director approved the 2015 Employee Incentive Plan. The total number of shares of Common Stock reserved for issuance by the Company either directly as Stock Awards or underlying Options granted under this Plan is 5,000,000 shares of Common Stock. On January 1, 2015, the Company granted options as follows under its 2015 Employee Incentive Plan: (i) Professor Ohry was granted options to purchase 250,000 shares of the Registrant’s common stock (“Option Shares”) at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Ohry SAB Agreement”). Provided the Ohry SAB Agreement remains in effect, 75,000 shares shall vest July 1, 2015, and the remaining 175,000 Option Shares shall vest at the rate of 25,000 Option Shares per quarter on the first day of each consecutive quarter; (ii) Dr. Ben Zion Weiner was granted options to purchase 350,000 Option Shares at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Weiner SAB Agreement”). Provided the Weiner SAB Agreement remains in effect, 105,000 Option Shares shall vest July 1, 2015 and the remaining 245,000 Option Shares shall vest at the rate of 35,000 Option Shares per quarter on the first day of each consecutive quarter; and (iii) Michel Sessler was granted options to purchase 150,000 Option Shares at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Sessler SAB Agreement”). Provided the Sessler SAB Agreement remains in effect, 45,000 Option Shares shall vest July 1, 2015 and the remaining 105,000 Option Shares shall vest at the rate of 15,000 Option Shares per quarter on the first day of each consecutive quarter.

 

Following is a table summarizing options still outstanding and exercisable along with exercise price and range of remaining term.

 

Type   Quantity     Exercise Price     Term
Avi Ohry     250,000     $ 1.00     24 Months
Dr. Ben Zion Weiner     350,000     $ 1.00     24 Months
Michael Sessler     150,000     $ 1.00     24 Months
Total     750,000              

 

As of December 31, 2019 and 2018, all of the Option Shares granted for a term of 2 years under the 2015 Employee Incentive Plan to the persons above have vested.

 

15
 

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

No equity compensation plan or agreements under which our Common Stock is authorized for issuance has been adopted during the fiscal years ended December 31, 2019 and 2018.

 

Sale of Unregistered Securities

 

Issuances of Common Stock and Common Stock Receivable in 2017:

 

On April 20, 2017, we issued 225,000 shares valued at $39,128 to two consultants for services provided. During the three months ended June 30, 2017, we authorized the issuance of 75,000 additional shares to the same two consultants valued at $0.14 or $21,000, which was recorded as stock payable.

 

Issuances of Common Stock in 2018:

 

During the year ended December 31, 2018, the Company raised $1,795,147 from a rights offering of a total of 9,555,468 Units at $0.10 per Unit, each consisting of: (i) one share of Common Stock; (ii) one Class A Warrant exercisable for a period of 24 months to purchase ½ share of Common Stock at the equivalent of $0.50 per share; and (iii) one Callable Class B Warrant exercisable for a period of 36 months to purchase ½ share of Common Stock at the equivalent of $1.25 per share. The warrants fair value is $408,093, and were valued using a Black- Scholes valuation model.

 

During the year ended December 31, 2018, the Company converted $167,800 in accrued wages and $107,503 in related party debt owed to management into 2,753,030 shares of Common Stock. In connection with this conversion, the Company issued 1,376,515 Class A Warrants; 1,376,515 Class B Warrants and 2,750,000 Class C Warrants. The warrants were valued at $385,552 and were recorded for a total as loss on conversion on debt under additional paid in capital of $315,900.

 

Issuances of Common Stock in 2019:

 

During the year ended December 31, 2019, we did not issue any restricted stock.

 

Penny Stock Considerations

 

Our Common Stock will be deemed to be “penny stock” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

 

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:

 

● Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

● Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

● Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and

● Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.

 

Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our Common Stock, which may affect the ability of Selling Shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our Common Stock even if our Common Stock becomes publicly traded. In addition, the liquidity for our Common Stock may be decreased, with a corresponding decrease in the price of our Common Stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.

 

ITEM 6. SELECTED FINANCIAL DATA

 

None.

 

16
 

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION

 

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

Plan of Operations

 

In January 2014, Mr. Weissberg negotiated with Lifewave Ltd., a public company organized under the laws of the State of Israel, for the purpose of acquiring certain of Lifewave’s IP assets pertaining to a wound healing device. The Registrant signed a patent purchase agreement with Lifewave on January 6, 2014 (the “Agreement”), the closing of which was subject to several material conditions, including our ability of raising equity capital sufficient to develop and commercially exploit the technology.

 

On June 4, 2014, we completed the purchase of all right, title and interest to certain IP assets, including rights to a wound treatment device. The IP assets, including the wound healing device, acquired by the Registrant are designed for wound treatment incorporating Bioelectrical Signal Therapy (“BST Device”). The BST Device implements patented and proprietary electrical stimulation technologies to treat hard-to-cure wounds and ulcers up to complete closure and/or cure.

 

Pursuant to the Agreement, the Registrant has agreed to pay Lifewave a royalty of from 10% to 20% of the profits (as defined in the Agreement) generated from the BST Device.

 

In June 2014, the Registrant entered into an agreement with the Austen BioInnovation Institute in Akron (“ABIA” or the “Institute”), for the purpose of bringing our BST Device to the U.S. market.

 

The Company’s management selected ABIA’s Product Innovation and Commercialization Division, which has significant expertise in wound healing, clinical trial development, and regulatory operations, to spearhead its pre-market clinical trial program, which is necessary to apply for regulatory approval from the United States Food and Drug Administration (“FDA”) to distribute the BST Device in the United States. As part of the Institute’s fully integrated regulatory and device development service Offerings, ABIA will prepare on behalf of the Company an application to obtain FDA approval. The initial trial will include 70 patients in a double-arm, randomized, multi-center study to assess the safety and efficacy of the BST Device in patients with Stage II and III pressure and venous stasis ulcers; and submit data to the FDA to obtain approval.

 

On December 18, 2015, the Registrant confirmed certain information that it had received from ABIA that, while ABIA still anticipated that it would be able to provide the Registrant with a final draft of the IDE application, ABIA had sustained financial difficulties and key personnel losses that would likely adversely affect its ability to perform under the Agreement on a timely basis, if at all. As a result, the Registrant requested that ABIA fully refund the monies paid to ABIA under the Agreement. In addition, the Registrant agreed to engage a professional regulatory consultant, who was a former member of ABIA’s regulatory staff, to serve as the Registrant’s FDA regulatory consultant on an interim basis, subject to the execution of a separate services agreement. The Registrant is also evaluating the advisability of engaging another firm to replace ABIA, which process may be expected to delay the IDE approval process for the BST Device.

 

The Company’s success is dependent upon the successful FDA clinical trial of its BST Device. The Device may need additional development and may never achieve safety or efficacy. The Company believes that its design and procedure show promise, but the path to commercial success, even if development milestones are met, may take more time and might be more costly.

 

There are a number of potential obstacles the Company might face, including the following:

 

● We may not be able to raise additional funds we may need to complete the clinical trials.

● Competitors may develop alternatives that render BST Device redundant or unnecessary.

● We may not have a sufficient and sustainable intellectual property position.

● Our device may be shown to have harmful side effects or other characteristics that indicate it is unlikely to be safe and effective

● Our device may not receive regulatory approval.

● Even if our device receives regulatory approval, it may not be accepted by patients, the medical community or third-party payers.

 

Recent Developments

 

During the first quarter of fiscal 2020, we were granted approval from the Helsinki committee to launch a Randomized Control Study (RCT) on 60-100 patients in order to assess the efficacy of the BST Device on diabetic foot patients in collaboration with Clalit Health Services Organization, Israel’s largest HMO, and the Israeli Ministry of Health (MOH). The study will be performed in 3-5 sites including leading clinics and hospitals in Israel. The Company intends to enroll the first patients to the study during the first quarter of 2020 and expects the trial to be conducted for 12-18 months until completion.

 

The Company has concluded a 35-wound, one arm clinical pilot, treating recalcitrant wounds in a leading wound clinic in Tel Aviv Israel, with 78% of the treated wounds completely healed within 20 weeks (Avg. wound duration at the base was 8 months) and an additional 16% of the treated wounds reaching wound area reduction of greater than 75%. Only 6% of the patients had no substantial positive clinical effect.

 

17
 

 

The Company’s distributor in Colombia, TekMedica SAS, has successfully concluded a clinical pilot study at the Hospital de la Samaritana in Bogota, Colombia. Starting in January 2020, Colsanitas, a leading Colombian HMO/Health insurance provider and operator of comprehensive healthcare services in Colombia and a member of the Sanitas group worldwide, will commence a clinical pilot study which is expected to be concluded by the end of the first half of 2020. If positive results are achieved, similar to those achieved in the Tel Aviv clinical trials, the Company believes that it will contribute to the penetration of the BST device treatment with Colsanitas health services in Colombia.

 

During the year ended December 31, 2018, the Company raised $1,795,147 from a rights offering of a total of 9,555,468 Units at $0.10 per Unit, each consisting of: (i) one share of Common Stock; (ii) one Class A Warrant exercisable for a period of 24 months to purchase ½ share of Common Stock at the equivalent of $0.50 per share; and (iii) one Callable Class B Warrant exercisable for a period of 36 months to purchase ½ share of Common Stock at the equivalent of $1.25 per share. The Company intends to use the proceeds of the rights offering for general corporate purposes, including working capital, capital expenditures, as well as acquisitions and other strategic purposes. The warrants fair value is $408,093 and were valued using a Black- Scholes valuation model.

 

On February 20, 2017, the Registrant received the official certification from the Israeli Ministry of Health authorizing the use of the Registrant’s BST Device in Israel. The BST Device implements patented and proprietary electrical stimulation technologies to treat hard-to-cure wounds and ulcers up to complete closure and/or cure.

 

On January 8, 2017, the Registrant entered into a five-year distribution agreement (the “Distribution Agreement”) with TekMedica SAS, organized under the laws of Colombia (“TekMedica” or the “Distributor”). Pursuant to the Distribution Agreement, the Registrant granted TekMedica the exclusive rights to distribute the Registrant’s medical device for the treatment of chronic wounds (the “BST Device™”) and the accompanying disposable electrodes (sometimes collectively, the “Products”) in Colombia (the “Territory”).

 

The Distribution Agreement provides that Registrant will provide Distributor with supplies of the BST Devicee and disposable electrode for treatment of patients in hospitals, long-term care facilities, medical centers and out-patient clinics. The Distributor will make an initial advance payment to be applied against the first year’s quota together with an initial order supported by a Letter of Credit with subsequent orders as part of the quota, as set forth in the Distribution Agreement, with minimum annual quota’s during the five-year term. The Distributor will be responsible for securing any product certification, permit, license or approval that may be required in the Territory for the marketing, sale, sublicensing and delivery and use of the BST Devise and Products in the Territory.

 

Results of Operations during the year ended December 31, 2019 as compared to the year ended December 31, 2018

 

We have not generated any revenues since inception. We had operating expenses mainly related to general and administrative expenses and research and development expenses. During the year ended December 31, 2019, we incurred $429,804 in net loss from operations due to general and administrative expenses of $247,654 and research and development expenses of $182,150 as compared to a net loss from operations of $1,684,788 due to general and administrative expenses of $1,567,226 and research and development expenses of $117,562 during the year ended December 31, 2018. During the year ended December 31, 2019 and 2018, we had other expenses of $7,008 and 329,050, respectively.

 

Our net loss from continuing operations during the years 2019 and 2018 were $436,812 and 2,013,838, respectively.

 

Liquidity, Capital Resources and Strategy

 

On December 31, 2019, we had total assets of $18,278 consisting of cash in the same amount. As of December 31, 2018, we had total assets of $395,377 consisting of $390,495 in cash and $4,882 in long-term assets. We had total current liabilities of $277,381 as of December 31, 2019 consisting of $4,050 in accounts payable, $1,564 in accrued interest, $105,862 in accrued salaries and $165,905 in loans from shareholders.

 

We had total current liabilities of $224,676 as of December 31, 2018 consisting of $1,564 in accrued interest, $27,566 in accrued expenses, $157,810 in accrued salaries and $37,736 in loans from shareholders.

 

We used $500,386 in our operating activities during the year 2019, which was due to a net loss of $436,812 offset by imputed interest of $7,008, an increase in accounts payable of $4,050, a decrease of $4,882 in accounts receivable and prepaid expenses; and a decrease in accrued salary due to a related party of $79,514.

 

We used $1,480,261 in our operating activities during the year 2018, which was due to a net loss of $2,013,838 offset by imputed interest of $13,150, a loss related to a debt settlement of $315,900, an increase in accounts payable and accrued expenses of $125,027, a decrease in accounts receivable and prepaid expenses of $21,000 and a decrease of $58,500 in prepaid expenses and other assets.

 

We financed our negative cash flow from operations in 2019 through borrowings of $128,169 from related parties.

 

We financed our negative cash flow from operations in 2018 through proceeds from a rights-offering of $1,795,146 and borrowings of $64,648 from a related party.

 

We had no investing activities during the years ended December 31, 2019 and 2018.

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America with an auditor’s going concern opinion for the years 2019 and 2018. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated.

 

18
 

 

The Company has reported a net loss of $436,812 for the year ended December 31, 2019 and $2,013,838 for the year ended December 31, 2018 and had accumulated deficits of $34,069,337 and $33,632,525 as of December 31, 2019 and 2018, respectively.

 

The Company had no revenues from operations during the years ended December 31, 2019 and 2018. As of December 31, 2019, the Company had $18,278 cash on hand and had negative working capital of $259,103.

 

We believe that our current cash on hand of $18,278 as of December 31, 2019, will not be sufficient to meet our operating requirements throughout the ensuing twelve-month period. We require additional financing at satisfactory terms and conditions, of which there can be no assurance, in order to satisfy our ongoing capital requirements for the next twelve months in order to execute our plan of operation as presently constituted.

 

We do not expect to generate cash flow from operations unless we receive FDA approval for our BST Device.

 

Our management believes that our operations will generate revenues in the US beginning of 2022. We expect that FDA approval for our BST Device will improve our ability to generate revenues from sales in other geographic areas. Our future ability to generate cash flows from operations will depend on the demand for our BST Device, as well as general economic, financial, competitive and other factors, many of which are beyond our control.

 

If and when we receive FDA approval of our BST Device, of which there can be no assurance, our business might not generate sufficient future cash flow in an amount sufficient to enable us to fund our liquidity needs, including working capital, capital expenditures, investments and other general corporate requirements.

 

Availability of Additional Capital

 

We have no commitments or arrangements, formal or otherwise, from any person or entity to provide us with any additional capital. The Company may be unable to implement its present plan of operation and this could have a material adverse effect on our business, prospects, financial condition and results of operations.

 

Our future financing transactions may include the issuance of equity and/or debt securities. In the event that we seek to raise funds through additional private placements of equity or convertible debt, the trading price of our common stock could be adversely effected. Further, if we issue additional equity or debt securities, stockholders may experience dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. We are not aware of any material trend, event or capital commitment, which would or could potentially adversely affect our liquidity. We do not have any arrangements with potential investors or lenders to provide us with any additional financing and there can be no assurance that any such additional financing will be available when required in order to proceed with the business plan.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2019 and 2018, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Exchange Act of 1934.

 

Critical Accounting Policies

 

Our significant accounting policies are described in the notes to our financial statements for the years ended December 31, 2019 and 2018, and are included elsewhere in this annual report.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 

We have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.

 

19
 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Report of Independent Registered Public Accounting Firm 21
Financial Statements:  
   
Balance Sheets as of December 31, 2019 and 2018 22
Statements of Operations for the Years Ended December 31, 2019 and 2018 23
Statement of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2019 and 2018 24
Statements of Cash Flows for the Years Ended December 31, 2019 and 2018 25
Notes to Financial Statements 26

 

20
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of E-Qure Corp.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of E-Qure Corp. (the Company) as of December 31, 2019 and 2018, and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years then ended December 31, 2019 and 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ M&K CPAS, PLLC

 

We have served as the Company’s auditor since 2011.

 

Houston, TX

 

April 13, 2020

 

21
 

 

E-QURE CORP.

Balance Sheets

At December 31, 2019 and 2018

 

    December 31, 2019     December 31, 2018  
Assets                
Current assets:                
Cash   $ 18,278     $ 390,495  
Total current assets     18,278       390,495  
Other assets     -       4,882  
Total Assets   $ 18,278     $ 395,377  
                 
Liabilities and Stockholders’ Equity (Deficit)                
                 
Current liabilities:                
Accounts payable   $ 4,050     $ -  
Accrued interest, related party     1,564       1,564  
Accrued salary, related party     105,862       157,810  
Accrued expenses     -       27,566  
Loan from shareholder, related party     165,905       37,736  
Total current liabilities     277,381       224,676  
                 
Stockholders’ equity (deficit):                
Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding     -       -  
Common stock, $0.00001 par value; 500,000,000 shares authorized; and 34,546,060 issued and outstanding at December 31, 2019 and 2018, respectively.     345       345  
Additional paid in capital     33,788,889       33,781,881  
Stock payable     21,000       21,000  
Accumulated deficit     (34,069,337 )     (33,632,525 )
Total stockholders’ equity (deficit)     (259,103 )     170,701  
Total Liabilities and Stockholders’ Equity (Deficit)   $ 18,278     $ 395,377  

 

See Summary of Significant Accounting Policies and Notes to Financial Statements.

 

22
 

 

E-QURE CORP.

Statements of Operations

For the Years Ended December 31, 2019 and 2018

 

    December 31, 2019     December 31, 2018  
             
Revenues   $ -     $ -  
                 
Expenses                
General and administrative     (247,654 )     (1,567,226 )
Research and development     (182,150 )     (117,562 )
Total     (429,804 )     (1,684,788 )
                 
Loss from operations     (429,804 )     (1,684,788 )
                 
Other expense                
Loss on debt conversion     -       (315,900 )
Interest expense     (7,008 )     (13,150 )
Total other expenses     (7,008 )     (329,050 )
Total expenses     (436,812 )     (2,013,838 )
                 
Loss from continuing operations before income tax     (436,812 )     (2,013,838 )
Income tax     -       -  
                 
Net loss   $ (436,812 )   $ (2,013,838 )
                 
Basic and diluted per share amount:                
Basic and diluted net loss   $ (0.01 )   $ (0.08 )
                 
Weighted average shares outstanding (basic and diluted)     34,546,060       26,680,834  

 

See Summary of Significant Accounting Policies and Notes to Financial Statements.

 

23
 

 

E-QURE CORP.

Statement of Changes in Stockholders’ Equity (Deficit)

For the Years Ended December 31, 2019 and 2018

 

          Additional                 Total
Stockholders’
 
    Common     Paid-in     Stock     Accumulated     Equity  
    Shares     Amount     Capital     Payable     Deficit     (Deficit)  
Balance at December 31, 2017     22,237,562     $ 221     $ 31,325,045     $ 21,000     $ (31,618,687 )   $ (272,421 )
Loss on debt conversion     -       -       315,900       -       -       315,900  
Capital raise     9,555,468       96       1,795,051       -       -       1,795,147  
Conversion of debt into equity     2,753,030       28       275,275       -       -       275,303  
Related party debt forgiveness     -       -       57,460       -       -       57,460  
Imputed interest     -       -       13,150       -       -       13,150  
Net loss     -       -       -       -       (2,013,838 )     (2,013,838 )
Balance at December 31, 2018     34,546,060     $ 345     $ 33,781,881     $ 21,000     $ (33,632,525 )   $ 170,701  
Imputed interest     -       -       7,008       -       -       7,008  
Net loss     -       -       -       -       (436,812 )     (436,812 )
Balance at December 31, 2019     34,546,060     $ 345     $ 33,788,889     $ 21,000     $ (34,069,337 )   $ (259,103 )

 

See Summary of Significant Accounting Policies and Notes to Financial Statements.

 

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E-QURE CORP.

Statements of Cash Flows

For the Years Ended December 31, 2019 and 2018

 

    December 31, 2019     December 31, 2018  
Cash flows from operating activities:                
Net loss   $ (436,812 )   $ (2,013,838 )
Adjustments to reconcile net loss to cash used in operating activities:                
Imputed interest     7,008       13,150  
Loss on debt settlement     -       315,900  
Changes in assets and liabilities:                
Increase (decrease) in accounts payable     4,050       -  
Increase (decrease) in accrued salary, related party     (79,514 )     125,027  
(Increase) decrease in accounts receivable and prepaid expenses     -       21,000  
(Increase) decrease in other assets     4,882       58,500  
Cash used in operating activities     (500,386 )     (1,480,261 )
                 
Cash flow from financing activities:                
Proceeds from issuance of common stock     -       1,795,146  
Related party borrowings     128,169       64,648  
Cash provided by financing activities     128,169       1,859,794  
                 
Change in cash     (372,217 )     379,533  
Cash - beginning of year     390,495       10,962  
Cash - end of year   $ 18,278     $ 390,495  
                 
Non-cash financing transactions:                
Debt and accrued wages converted into common stock   $ -     $ 275,303  
Forgiveness of debt   $ -     $ 57,460  

 

See Summary of Significant Accounting Policies and Notes to Financial Statements.

 

25
 

 

E-Qure Corp.

Notes to Financial Statements

December 31, 2019

 

1. The Company

 

Organizational Background:

 

Organizational Background: E-Qure Corp., (“EQUR” or the “Company”) is a Delaware corporation with a mailing address in New York, NY and offices in Israel.

 

Basis of Presentation:

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of December 31, 2019, the cash resources of the Company were insufficient to meet its current business plan, and the Company had negative working capital. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

Significant Accounting Policies

 

Reclassifications:

 

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on net earnings, financial position or cash flows.

 

Use of Estimates:

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

 

Cash and Cash Equivalents:

 

For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents as of December 31, 2019 or 2018.

 

Stock Based Compensation:

 

Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company’s common stock, the estimated volatility of the Company’s common stock, the exercise price of the warrants and the risk-free interest rate.

 

Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock:

 

We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.

 

Fair Value of Financial Instruments:

 

FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At December 31, 2019 and 2018, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued salaries due to related parties) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

 

26
 

 

Fair Value Measurements:

 

The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:

 

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

 

Level 2: Inputs to the valuation methodology include:

 

- Quoted prices for similar assets or liabilities in active markets;

- Quoted prices for identical or similar assets or liabilities in inactive markets;

- Inputs other than quoted prices that are observable for the asset or liability;

- Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

 

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The assets or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following table presents assets that were measured and recognize at fair value on December 31, 2019 and 2018 and the year then ended on a recurring basis:

 

Fair Value Measurements at December 31, 2019

 

    Total     Quoted Prices in Active Markets for Identical Assets
(Level 1)
    Significant Other Observable Inputs
(Level 2)
    Significant Unobservable Inputs
(Level 3)
 
None   $         -     $         -     $         -     $         -  
Total assets and liabilities at fair value   $ -     $ -     $ -     $ -  

 

Fair Value Measurements at December 31, 2018

 

    Total     Quoted Prices in Active Markets for Identical Assets
(Level 1)
    Significant Other Observable Inputs
(Level 2)
    Significant Unobservable Inputs
(Level 3)
 
None   $         -     $         -     $         -     $         -  
Total assets and liabilities at fair value   $ -     $ -     $ -     $ -  

 

When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the fiscal periods ended December 31, 2019 and 2018, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.

 

Earnings per Common Share:

 

We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

Income Taxes:

 

We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

 

27
 

 

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

 

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset.

 

Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.

 

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

 

ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.

 

Uncertain Tax Positions:

 

The Financial Accounting Standards Board issued Interpretation No. 740, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN No. 740”) which was effective for the Company on January 1, 2007. ASC No. 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC No. 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC No. 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements.

 

Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2008. We are not under examination by any jurisdiction for any tax year. At December 31, 2018, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under ASC 740.

 

Recently Issued Accounting Pronouncements

 

In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, lease with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. During the year ended December 31, 2019, the Company assessed the impact this guidance had on its financial statements and concluded that at present ASU No. 2018-10 has no impact on its financial statements due to not having any commitment to stay in our property longer than a year.

 

In May 2017, the FASB issued Update 2017-09 - Compensation - Stock Compensation (Topic 718): Effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. Early adoption is permitted.

 

28
 

 

In February 2017, FASB issued Update 2017-06 - Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force). Under Topic 960, investments in master trusts are presented in a single line item in the statement of net assets available for benefits. Similar guidance is not provided in Topic 962 or 965, which has resulted in diversity in practice. For each master trust in which a plan holds an interest, the amendments in this Update require a plan’s interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. Topics 960 and 962 require plans to disclose their percentage interest in the master trust and a list of the investments held by the master trust, presented by general type, within the plan’s financial statements. Stakeholders said that the disclosure can be misleading when the plan has a divided interest in the individual investments of the master trust (that is, when the plan has a specific, rather than a proportionate, interest in the master trust). The amendments in this Update remove the requirement to disclose the percentage interest in the master trust for plans with divided interests and require that all plans disclose the dollar amount of their interest in each of those general types of investments, which supplements the existing requirement to disclose the master trust’s balances in each general type of investments. Early adoption is permitted.

 

In the opinion of management, the information furnished in these interim financial statements reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the twelve-month periods ended December 31, 2019 and 2018. All such adjustments are of a normal recurring nature.

 

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

 

2. Stockholders’ Equity

 

Common Stock

 

We are currently authorized to issue up to 500,000,000 shares of $0.00001 par value common stock. All issued shares of common stock are entitled to vote on a 1 share/1 vote basis.

 

Issuances of Common Stock in 2019:

 

During the year ended December 31, 2019, we did not issue any restricted stock.

 

Issuances of Common Stock in 2018:

 

During the year ended December 31, 2018, the Company raised $1,795,146 from a rights offering of a total of 9,555,468 Units at $0.10 per Unit, each consisting of: (i) one share of Common Stock; (ii) one Class A Warrant exercisable for a period of 24 months to purchase ½ share of Common Stock at the equivalent of $0.50 per share; and (iii) one Callable Class B Warrant exercisable for a period of 36 months to purchase ½ share of Common Stock at the equivalent of $1.25 per share. The Company intends to use the proceeds of the rights offering for general corporate purposes, including working capital, capital expenditures, as well as acquisitions and other strategic purposes. The warrants fair value is $408,093 and were valued using a Black- Scholes valuation model.

 

During the year ended December 31, 2018, the Company converted $167,800 in accrued wages and $107,503 in related party debt owed to management into 2,753,030 shares of Common Stock. In connection with this conversion, the Company issued 1,376,515 Class A Warrants; 1,376,515 Class B Warrants and 2,750,000 Class C Warrants. The warrants were valued at $385,552 and were recorded for a total as loss on conversion on debt under additional paid in capital of $315,900.

 

Preferred Stock

 

We are currently authorized to issue up to 25,000,000 shares of $0.00001 par value preferred stock. There are no preferred shares outstanding as of December 31, 2019 and 2018.

 

Stock Options

 

On January 1, 2015, the Company authorized the adoption of the 2015 Employee Incentive Plan.

 

Stock Options and Warrants Granted

 

On January 1, 2015, the board of director approved the 2015 Employee Incentive Plan. The total number of shares of Common Stock reserved for issuance by the Company either directly as Stock Awards or underlying Options granted under this Plan is 5,000,000 shares of Common Stock. On January 1, 2015, the Company granted options as follows under its 2015 Employee Incentive Plan: (i) Professor Ohry was granted options to purchase 250,000 shares of the Registrant’s common stock (“Option Shares”) at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Ohry SAB Agreement”). Provided the Ohry SAB Agreement remains in effect, 75,000 shares shall vest July 1, 2015, and the remaining 175,000 Option Shares shall vest at the rate of 25,000 Option Shares per quarter on the first day of each consecutive quarter; (ii) Dr. Ben Zion Weiner was granted options to purchase 350,000 Option Shares at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Weiner SAB Agreement”). Provided the Weiner SAB Agreement remains in effect, 105,000 Option Shares shall vest July 1, 2015 and the remaining 245,000 Option Shares shall vest at the rate of 35,000 Option Shares per quarter on the first day of each consecutive quarter; and (iii) Michel Sessler was granted options to purchase 150,000 Option Shares at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Sessler SAB Agreement”). Provided the Sessler SAB Agreement remains in effect, 45,000 Option Shares shall vest July 1, 2015 and the remaining 105,000 Option Shares shall vest at the rate of 15,000 Option Shares per quarter on the first day of each consecutive quarter.

 

29
 

 

Following is a table summarizing options still outstanding and exercisable along with exercise price and range of remaining term.

 

Name   Quantity     Exercise Price     Term
Avi Ohry     250,000     $ 1.00     24 Months
Dr. Ben Zion Weiner     350,000     $ 1.00     24 Months
Michael Sessler     150,000     $ 1.00     24 Months
Total     750,000              

 

As of December 31, 2019 and 2018, all of the Option Shares granted under the 2015 Employee Incentive Plan to the persons under the terms outlined above have vested.

 

During the years ended December 31, 2019 and 2018, we expensed $0 in relation the options granted above.

 

During the year ended December 31, 2018, the Company’s chief executive officers and chairman converted debt and accrued wages in the aggregate amount of $275,303 into Units consisting of a total of: (i) 2,753,030 restricted shares, 1,376,515 Class A Warrants exercisable to purchase 0.5 shares of common stock at $0.50 per shares for a period of 24 months and Class B Warrants exercisable to purchase 0.5 shares of common stock at $1.25 per shares for a period of 36 months, having the same terms as the Class A and Class B Warrants set forth in the Reg S Unit Offering, and 2,750,000 Class C Warrants exercisable to purchase one share of Common Stock at a price of $1.00 per Share. The warrants were valued at $385,552 using the Black- Scholes valuation model and were recorded for a total as loss on conversion on debt under additional paid in capital of $315,900.

 

Following is a table summarizing warrants outstanding and exercisable along with exercise price and range of remaining term.

 

Name   Description   Grant Date of Options/Warrants   Number of Options/Warrants     Stock Price on Measurement Date     Exercise Price of Options/Warrants     Terms of Options/warrants
Warrants Class A   Shares for cash   09/05/2018     4,777,734     $ 0.08     $ 0.50     2 years
Warrants Class B   Shares for cash   09/05/2018     4,777,734     $ 0.08     $ 0.50     3 years
                                     
Warrants Class A   Debt conversion   07/01/2018     1,376,515     $ 0.07     $ 0.50     2 years
Warrants Class B   Debt conversion   07/01/2018     1,376,515     $ 0.07     $ 1.25     3 years
Warrants Class C   Debt conversion   07/01/2018     2,750,000     $ 0.07     $ 1.00     10 years
Total             15,058,498                      

 

3. Notes Payable

 

During the year ended December 31, 2019 and 2018, the Company received advances on outstanding notes for a total of $128,169 and $37,736, respectively, from a related party. As of December 31, 2019 and 2018, the Company had outstanding loans due to related parties of $165,905 and $37,736, respectively.

 

    December 31, 2019     December 31, 2018  
Itsik Ben Yesha, CTO   $ 100,000     $ 37,736  
Michael Cohan, related party   $ 28,169     $ -  

 

During the year ended December 31, 2018, the Company’s chief executive officers and chairman converted debt and accrued wages in the aggregate amount of $275,303 into Units consisting of a total of: (i) 2,753,030 restricted shares, 1,376,515 Class A Warrants and Class B Warrants, having the same terms as the Class A and Class B Warrants set forth in the Reg S Unit Offering, and 2,750,000 Class C Warrants exercisable to purchase one share of Common Stock at a price of $1.00 per Share. The warrants were valued at $385,552 using the Black- Scholes valuation model and were recorded for a total as loss on conversion on debt under additional paid in capital of $315,900.

 

4. Other Assets

 

As of December 31, 2019 and 2018, the Company recorded $0 and $4,882, respectively, as other assets representing services to be repaid in cash or securities compliance services.

 

5. Related Party Transactions

 

During the year ended December 31, 2019 and 2018, the Company received advances on outstanding notes for a total of $128,169 and $37,736, respectively, from a related party. As of December 31, 2019 and 2018, the Company had outstanding loans due to related parties of $165,905 and $37,736, respectively.

 

30
 

 

During the year ended December 31, 2018, the Company’s chief executive officers and chairman converted debt and accrued wages in the aggregate amount of $275,303 into Units consisting of a total of: (i) 2,753,030 restricted shares, 1,376,515 Class A Warrants and Class B Warrants, having the same terms as the Class A and Class B Warrants set forth in the Reg S Unit Offering, and 2,750,000 Class C Warrants exercisable to purchase one share of Common Stock at a price of $1.00 per Share. The warrants were valued at $385,552 using the Black- Scholes valuation model and were recorded for a total as loss on conversion on debt under additional paid in capital of $315,900.

 

As of December 31, 2019 and December 31, 2018, we had accrued salaries of $105,862 and $157,810, respectively, due to three of our officers.

 

On January 1, 2015, the board of director approved the 2015 Employee Incentive Plan. The total number of shares of Common Stock reserved for issuance by the Company either directly as Stock Awards or underlying Options granted under this Plan is 5,000,000 shares of Common Stock. On January 1, 2015, the Company granted options as follows under its 2015 Employee Incentive Plan: (i) Professor Ohry was granted options to purchase 250,000 shares of the Registrant’s common stock (“Option Shares”) at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Ohry SAB Agreement”). Provided the Ohry SAB Agreement remains in effect, 75,000 shares shall vest July 1, 2015, and the remaining 175,000 Option Shares shall vest at the rate of 25,000 Option Shares per quarter on the first day of each consecutive quarter; (ii) Dr. Ben Zion Weiner was granted options to purchase 350,000 Option Shares at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Weiner SAB Agreement”). Provided the Weiner SAB Agreement remains in effect, 105,000 Option Shares shall vest July 1, 2015 and the remaining 245,000 Option Shares shall vest at the rate of 35,000 Option Shares per quarter on the first day of each consecutive quarter; and (iii) Michel Sessler was granted options to purchase 150,000 Option Shares at an exercise price equal to one dollar ($1.00) per Option Share. The Option Shares shall vest pursuant to the terms of a Scientific Advisory Board Agreement dated January 1, 2015 (the “Sessler SAB Agreement”). Provided the Sessler SAB Agreement remains in effect, 45,000 Option Shares shall vest July 1, 2015 and the remaining 105,000 Option Shares shall vest at the rate of 15,000 Option Shares per quarter on the first day of each consecutive quarter. See also Note 2 above.

 

As of December 31, 2019 and 2018, all of the Option Shares granted under the 2015 Employee Incentive Plan to the persons under the terms outlined above have vested. During the years ended December 31, 2019 and 2018, we expensed $0 in relation the options granted above.

 

As of December 31, 2019 and 2018, we had accrued interest of $1,564, due to Mr. Weissberg, who is the Company’s Chairman of the audit committee. The principal underlying the note was converted in 2014.

 

6. Taxes

 

We have adopted ASC 740 which provides for the recognition of a deferred tax asset based upon the value the loss carry-forwards will have to reduce future income taxes and management’s estimate of the probability of the realization of these tax benefits. Our net operating loss carryovers incurred prior to 2008 considered available to reduce future income taxes were reduced or eliminated through our recent change of control (I.R.C. Section 382(a)) and the continuity of business limitation of I.R.C. Section 382(c).

 

We have a current operating loss carry-forward of $4,163,621 resulting in deferred tax assets of $874,360. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all our net deferred tax asset.

 

Future utilization of currently generated federal and state NOL and tax credit carry forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions. The annual limitation may result in the expiration of NOL and tax credit carry forwards before full utilization.

 

    December 31  
    2019     2018  
Individual components giving rise to the deferred tax assets are as follows:   $       $    
Future tax benefit arising from net operating loss carryovers     874,360       782,630  
Less valuation allowance     (874,360 )     (782,630 )
Net deferred asset   $ -     $ -  

 

The provision (benefit) for income taxes for the years ended December 31, 2019 and 2018 were assuming a 21% effective tax rate.

 

The Company is not under examination by any jurisdiction for any tax year. Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2009.

 

7. Going Concern

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

8. Commitments and Contingencies.

 

As of December 31, 2019 and 2018, there were no legal proceedings against the Company.

 

9. Subsequent Events

 

There were no subsequent events following the year ended December, 31, 2019 through the date the financial statements were issued that would materially affect the financial statements.

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As of December 31, 2019, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the fiscal year 2019 under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15. Internal control over financial reporting is defined in Rule 13a-15(f) and 15(d)-15(f) under the Exchange Act as a process designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. Management conducted an assessment of the Company’s internal control over financial reporting as of December 31, 2019 based on the framework and criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on the assessment, management concluded that, as of December 31, 2019, the Company’s internal control over financial reporting was not effective based on those criteria. Management has identified corrective actions for the weakness and has begun implementation during 2020.

 

The Company recognizes the following weaknesses and deficiencies of the Company as of December 31, 2019:

 

We recognized the following deficiencies that we believe to be material weaknesses:

 

- The Company has not fully designed, implemented or assessed internal controls over financial reporting as a result of which management assessed and concluded that internal controls were ineffective this year.

 

We recognized the following deficiencies that we believe to be significant deficiencies:

 

- The Company has no formal control process related to the identification and approval of related party transactions.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this annual report.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

32
 

 

PART III

 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE

 

Our directors were elected to serve until the next annual meeting of shareholders and until his respective successors will have been elected and will have qualified. The following table sets forth the name, age and position held with respect to our present director and executive officer:

 

Name   Age   Title   Executive Officer Since
Ohad Goren   48   Chief Executive Officer and director   06/2014
Gal Peleg   41   Chief Financial Officer   08/2014
Ron Weissberg   60   Chairman   12/2013
Itsik Ben Yesha   66   Chief Technology Officer and director   06/2014
Dr. Michael Sessler   60   Director   08/2014

 

Ohad Goren, age 48, Chief Executive Officer and director. During the past five years, Mr. Goren has served in the following positions: from 2011 through 2013 Mr. Goren served as an advisor to several biot-ech and high-tech startup companies. During 2010 and 2011, Mr. Goren served as CEO of Pollogen Ltd., a private Israeli company engaged in the development, manufacture and marketing of medical aesthetic devices with sales in Europe, North and South America, and major Asian countries. Prior to joining Pollogen Ltd., during 2008 to 2009, Mr. Goren served as a consultant to start-down companies principally in the biotechnology and hi-tech industries. From 2005 through 2008, Mr. Goren was the CEO of Lifewave Ltd., a public Israeli company, where he had responsibility for Lifewave’s IPO, overseeing the development of its chronic wound treatment device and Lifewave’s regulatory compliance, among other duties. From 1997 to 2005 Mr. Goren served as the Marketing and Sales Manager of the Services Division of Oracle Corp., in Israel. From 1990 to 1997 Mr. Goren served as the Deputy Consul at the Israeli Embassy, Washington, D.C. Mr. Goren received his BA degree and his MBA degree from the University of Maryland, in the U.S.

 

Gal Peleg, age 41, Chief Financial Officer. On August 21, 2014, the Registrant appointed Mr. Gal Peleg as Chief Financial Officer, replacing Ron Weissberg, the Registrant’s Chairman and principal stockholder, who had served as interim CFO since December 27, 2013. Mr. Weissberg will continue to serve as Chairman of the Board of Directors.

 

Mr. Peleg is a Certified Public Accountant. From 2007 to the present, Mr. Peleg served as Chief Financial Officer of Medical Life-Wave, a medical device company that was listed on the Tel-Aviv Stock Exchange (“TASE”). He was responsible for quarterly, annual and other reports filed with TASE, compliance with regulatory protocol and the rules and regulations under the Israeli securities laws. From January 2006 through October 2007, Mr. Peleg served as controller of Tescom Software System Ltd, a TASE listed, software testing company with worldwide operations and offices in Israel, United States and Singaport. From 2004 to 2006, Mr. Peleg served as controller of Internet Gold, a majority stockholder of BCOM Ltd., an Israeli company listed on NASDAQ and TASE. From 2001 to 2004, Mr. Peleg worked at Ernst & Young as Senior, Bio-Tech/Medical Device Section, providing audit services in accordance with US GAAP and Israeli GAAP.

 

Ron Weissberg, age 60, Chairman of the Board since December 27, 2013. From December 27, 2013 until June 5, 2014, Mr. Weissberg served as the Registrant’s CEO, on which latter date the Board of Directors appointed Ohad Goren as the CEO. In addition, from December 27, 2013 until August 21, 2014, Mr. Weissberg also served as the Registrant’s CFO, on which latter date the Board of Directors appointed Mr. Gal Peleg as CFO.

 

From May 2011 to the present, Mr. Weissberg has served as an executive officer and director of Bio-Light Israeli Life Sciences Investments Ltd, a public company listed on the Tel-Aviv Stock Exchange, engaged in the business of biomed innovation. From May 2003 to the present, Mr. Weissberg has been a director of Midroog Ltd., an Israeli Credit Rating Agency, a company engaged in the business of credit rating for the domestic Israeli market. From February 1988 to the present, Mr. Weissberg has been a director of The Israel Land Development Company Ltd (“ILDC”), a public company listed on the TASE, engaged in the business of owning and managing commercial real estate in Israel, Europe and Canada.

 

Since 2011, Mr. Weissberg has been ILDC’s Vice-Chairman. From 1994 until 2006, he was chairman of ILD Insurance Company Ltd, a public company engaged in the business of underwriting property, casualty and life insurance with total portfolio of approximately US$1 billion and 500 employees. ILD Insurance is listed on the TASE. From 1996 to 2000, Mr. Weissberg also served as its CEO. From June 2008 until October 2010, he was the CEO and a director of Portfolio Green Ltd., a public company listed on the TASE engaged in the business of Real Estate Development in the U.S.

 

The Registrant believes that Mr. Weissberg’s many years of experience as a senior executive officer and director of several successful public companies in a variety in industries, all of which have had far greater resources and operating history than the Registrant, together with his material equity position in the Registrant, renders him highly qualified to serve on the Registrant’s Board of Directors.

 

Itsik Ben Yesha, age 66, Chief Technology Officer and director. He was a founder and a principal and involved in the Registrant’s efforts leading to the negotiations and closing of the above-referenced Patent Purchase Agreement. From 1991 through 2013, Mr. Ben Yesha was the founder and a partner of Hisense Ltd., an Israeli medical device company for respiratory monitoring devices for infants. He previously served as Executive Vice President of Lifewave Ltd. From 1998 to 2003 Mr. Ben Yesha was the Executive Vice President and VPL Division President with Valor Computerized Systems Ltd., a CAD/CAM Software company listed on the Frankfurt Stock Exchange and later acquired by Mentor Graphics (NASDAQ: MENT). From 1979 to 1997, Mr. Ben Yesha served in Tadiran Telecom Group in various rolls, starting as a R&D engineer, designing computerized electronic exchanges (Tadex, Coral), and finally serving as the CFO of Tadiran Wireless Telecom division, bringing it from $0 to $50 million in annual sales within 3 years.

 

33
 

 

Dr. Michael Sessler, age 60, Director. Dr. During the last 22 years, Dr. Sessler has been actively engaged in business development. From 1992 through 2009, Dr. Sessler was the director of business development for the Electra Consumer Products subsidiary of Elco Group (ELCO), a listed public company on the Tel-Aviv Stock Exchange (“TASE”) with total assets in excess of $1.3 billion and net revenues in excess of $1.9 billion in 2013. During his tenure at ELCO, Dr. Sessler also established and managed new ELCO businesses in Europe, Asia, South America and Australia and also served as Senior Vice President of Electra Group until 2009.

 

Since 2009, Dr. Sessler has been a managing director of Allsons Ltd., an investment company with assets in Europe and Israel. During the past 5 years, Dr. Sessler has also been member of the board of directors of The Leser Group Ltd., a private New York-based real-estate development company with bonds traded on the TASE and over $130 million in assets.

 

Dr. Sessler is a qualified and experienced BOD member due to his experience in developing and managing major subsidiaries of public companies, working in challenging domestic and international markets, as well as his experience in introducing new products to a wide variety of markets, together with his ability to manage and oversee manufacturing control processes. In the opinion of the Company’s management and board of directors, Dr. Sessler is a highly qualified professional to serve as a member of the Company’s board of directors.

 

Dr. Sessler is a medical doctor, having received is MD from the Medical University of Rome, Italy under the guidance of Prof. Rita Levi Montalccini, Nobel Prize winner in Physiology/Medicine in 1986.

 

Director Independence. In determining whether or not our directors are considered independent, the Company used the definition of independence as defined in NASDAQ Rule 4200. Based on that definition we believe that Dr. Michael Sessler is independent.

 

NASDAQ Rule 4200. The NASDAQ Rule 4200, which sets forth several tests to determine whether a director of a listed company is independent. Rule 4200 provides that a director would not be considered independent if the director or an immediate family member accepted any compensation from the listed company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the determination of independence (excluding compensation for board or board committee service, compensation paid to an immediate family member as a non-executive employee, benefits paid under a tax-qualified retirement plan and non-discretionary compensation).

 

Directors’ Term of Office. Our directors are elected to serve until the next annual meeting of shareholders and until their respective successors will have been elected and will have qualified.

 

Audit Committee and Financial Expert, Compensation Committee, Nominations Committee. We do not have any of the above-mentioned standing committees because our corporate financial affairs and corporate governance are simple in nature at this stage of development and each financial transaction is approved by our sole officer or director.

 

Code of Ethics. We do not currently have a Code of Ethics applicable to our principal executive officers; however, the Company plans to implement such a code in the third quarter of 2020.

 

Potential Conflicts of Interest. Since we do not have an audit or compensation committee comprised of independent Directors, the functions that would have been performed by such committees are performed by our Board of Directors. Thus, there is a potential conflict of interest in that our Directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our Executives or Directors.

 

Board’s Role in Risk Oversight. The Board assesses on an ongoing basis the risks faced by the Company. These risks include financial, technological, competitive, and operational risks. In addition, since the Company does not have an Audit Committee, the Board is also responsible for the assessment and oversight of the Company’s financial risk exposures.

 

Involvement in Certain Legal Proceedings. We are not aware of any material legal proceedings that have occurred within the past ten years concerning any Director or control person which involved a criminal conviction, a pending criminal proceeding, a pending or concluded administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.

 

Section 16(a) Compliance. Section 16(a) of the Securities and Exchange Act of 1934 requires the Registrant’s directors and executive officers, and persons who own beneficially more than ten percent (10%) of the Registrant’s Common Stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission. Copies of all filed reports are required to be furnished to the Registrant pursuant to Section 16(a). Based solely on the reports received by the Registrant and on written representations from reporting persons, the Registrant was informed that its executive officers, directors and ten percent (10%) shareholders have not filed reports required to be filed under Section 16(a).

 

34
 

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following table sets forth information concerning the total compensation that we have paid or that has accrued on behalf of our chief executive officer and other executive officers during the fiscal years ending December 31, 2019, 2018 and 2017.

 

                            Long Term        
          Annual Compensation     Compensation Awards        
                      Other     Restricted     Securities        
                      Annual     Stock     Underlying     All Other  
Name and Principal Position   Year     Salary
($)
    Bonus
($)
    Compensation
($)
    Award(s)
($)
    Options
($)
    Compensation
($)
 
Ohad Goren, CEO   2019          0          0            0           0           0            0  
    2018       0       0       0       0       0       0  
    2017       140,400       0       0       0       0       0  
Gal Peleg, CFO   2019       0       0       0       0       0       0  
    2018       0       0       0       0       0       0  
    2017       17,550       0       0       0       0       0  
Itsik Ben Yesha, CTO   2019       72,500       0       0       0       0       0  
    2018       72,500       0       0       0       0       0  
    2017       72,500       0       0       0       0       0  

 

Aggregated Option Exercises and Fiscal Year-End Option Value

 

There were no stock options exercised during the years ended December 31, 2019 and 2018 by the executive officers named in the Summary Compensation Table.

 

Long-Term Incentive Plan (“LTIP”) Awards

 

There were no awards made to a named executive officers in the last completed fiscal year under any LTIP.

 

Compensation of Directors

 

Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.

 

Employment Agreements

 

We have employment agreement in place with our CEO, CFO and CTO.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

 

The table below discloses any person (including any “group”) who is known to the Registrant to be the beneficial owner of more than five (5%) percent of the Registrant’s Common Stock securities and the beneficial ownership of Registrant’s director and executive officer. As of April 13, 2020, the Registrant had 34,546,060 shares of Common Stock issued and outstanding.

 

Name of Beneficial Owner   Common Stock Beneficially Owned     Percentage of Common Stock Owned  
Ohad Goren, CEO                
31 Nahal Ga’aton Street, Modiin, 71700, Israel     1,550,000       4,49 %
Gal Peleg, CFO                
11 Yosef Nakar Street, Petach Tikva, Israel     225,000       0.65 %
Ron Weissberg, Chairman                
7 Hamitnachalim Street, Savyon, Israel     4,273,654       12.37 %
Itsik Ben Yesha, Chief Technology Officer                
126 Alon Street, Shilat, 73188, Israel     4,363,600       12.63 %
Dr. Michael Sessler, Director                
50 Hagiva Street, Savyon, Israel     0       0 %
Director and Officer (5 people)     10,412,254       30.14 %

 

(1) Applicable percentage ownership is based on 34,546,060 shares of Common Stock outstanding as of April 13, 2020. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock that are currently exercisable or exercisable within 60 days of April 13, 2020 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

35
 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE

 

Certain Related Party Transactions During the Last Two Fiscal Years

 

During the year ended December 31, 2019 and 2018, the Company received advances on outstanding notes for a total of $128,169 and $37,736, respectively, from a related party.

 

During the year ended December 31, 2018, the Company’s chief executive officers and chairman converted debt and accrued wages in the aggregate amount of $275,303 into Units consisting of a total of: (i) 2,753,030 restricted shares, 1,376,515 Class A Warrants and Class B Warrants, having the same terms as the Class A and Class B Warrants set forth in the Reg S Unit Offering, and 2,750,000 Class C Warrants exercisable to purchase one share of Common Stock at a price of $1.00 per Share. The warrants were valued at $385,552 using the Black- Scholes valuation model and were recorded for a total as loss on conversion on debt under additional paid in capital of $315,900.

 

As of December 31, 2019 and December 31, 2018, we had accrued salaries of $105,862 and $157,810, respectively, due to three of our officers.

 

As of December 31, 2019 and 2018, we had accrued interest of $1,564 due to Mr. Weissberg, who is the Company’s Chairman.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The Registrant’s Board of Directors has appointed M&K CPAS, PLLC (“M&K”) as independent public accountant for the fiscal year ended December 31, 2019 and 2018.

 

Principal Accounting Fees

 

The following table presents the fees for professional audit services rendered by M&K for the audit of the Registrant’s annual financial statements for the years ended December 31, 2019 and 2018, and fees billed for other services rendered by M&K during those periods.

 

    Year Ended     Year Ended  
    December 31, 2019     December 31, 2018  
Audit fees (1)   $ 9,300     $ 9,300  
Audit-related fees (2)            
Tax fees (3)            
All other fees            

 

 

(1) Audit fees consist of audit and review services, consents and review of documents filed with the SEC.

(2) Audit-related fees consist of assistance and discussion concerning financial accounting and reporting standards and other accounting issues.

(3) Tax fees consist of preparation of federal and state tax returns, review of quarterly estimated tax payments, and consultation concerning tax compliance issues.

 

36
 

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a) The following documents are filed as exhibits to this report on Form 10-K or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.

 

Exhibit   Description of Exhibit
3.1   Delaware Certificate of Incorporation, filed with the Company’s S-1 on September 6, 2014.
3.1(a)   Original Articles of Incorporation, attached to the Company’s Form 10-12G as filed with the SEC on April 25, 2013.
3.1(b)   Amended to Certificate of Incorporation reflecting name change, filed with the Company’s S-1 on September 6, 2014.
3.2   Bylaws, filed with the Company’s S-1 on September 6, 2014.
10.4   Consulting Agreement between the Company and Mr. Tal Yoresh, attached to the Company’s Form 10-12G/A as filed with the SEC on November 20, 2013.
10.5   Consulting Agreement between the Company and Mr. Itai Weisberg, attached to the Company’s Form 10-12G/A as filed with the SEC on November 20, 2013.
10.6   Securities Transfer Agreement between the Company and Amir Uziel and Lavi Krasney, attached to the Company’s Form 10-12G/A as filed with the SEC on April 25, 2013.
10.7   Patent Purchase Agreement between the Company and Lifewave Ltd., dated January 6, 2014, attached to the Company’s Form 8-K as filed with the SEC on June 6, 2014.
10.8   Clinical Trials Agreement between the Company and Austen BioInnovation Institute, dated June 5, 2014, filed with the Company’s S-1 on September 6, 2014.
10.9   List of Company’s patents, filed with the Company’s S-1 on September 6, 2014.
10.10   Asset Purchase Agreement between the Company and Michael Cohen, attached to the Company’s Form 8-K as filed with the SEC on October 10, 2014.
10.11   Service Agreement between the Company and Ron Weissberg, Chairman, filed with the Company’s S-1/A on December 5, 2014.
10.12   Service Agreement between the Company and Ohad Goren, CEO, filed with the Company’s S-1/A on December 5, 2014
10.13   Service Agreement between the Company and Gal Peleg, CFO, filed with the Company’s S-1/A on December 5, 2014
10.14   Service Agreement between the Company and Itsik Ben Yesha, filed with the Company’s S-1/A on December 5, 2014
10.15   Scientific Advisory Board Agreement between the Company and Prof. Avi Ohry, attached to the Company’s Form 8-K as filed with the SEC on June 9, 2015.
10.16   Scientific Advisory Board Agreement between the Company and Dr. Be Zion Weiner, attached to the Company’s Form 8-K as filed with the SEC on June 9, 2015.
10.17   Distribution Agreement between the Company and Chemipal Ltd, dated July 30, 2015, attached to the Company’s Form 8-K as filed with the SEC on July 30, 2015.
10.18   2015 Employee Incentive Plan, attached to the Company’s Form 10-Q as filed with the SEC on August 6, 2015.
31.1   Section 302 Certification of the Sarbanes-Oxley Act of 2002 of Ohad Goren, filed herewith.
31.2   Section 302 Certification of the Sarbanes-Oxley Act of 2002 of Gal Peleg, filed herewith.
32.1   Section 906 of the Sarbanes-Oxley Act of 2002 of Ohad Goren, filed herewith
32.2   Section 906 of the Sarbanes-Oxley Act of 2002 of Gal Peleg, filed herewith

 

37
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  E-Qure Corp.
   
Date: April 13, 2020 By: /s/ Ohad Goren
  Name: Ohad Goren
  Title: Chief Executive Officer, Principal Accounting and Financial Officer and Director

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Date: April 13, 2020 By: /s/ Gal Paleg
  Name: Gal Paleg
  Title: Chief Executive Officer, Principal Accounting and Financial Officer and Director

 

38

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