NANOVIBRONIX, INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (unaudited)
|
U.S. dollars in thousands
|
|
|
March 31,
|
|
|
December 31
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Unaudited
|
|
|
Audited
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
51
|
|
|
$
|
106
|
|
Trade receivables
|
|
|
4
|
|
|
|
6
|
|
Prepaid expenses and other accounts receivable
|
|
|
44
|
|
|
|
42
|
|
Inventories
|
|
|
60
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
159
|
|
|
|
221
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Long-term prepaid expense
|
|
|
5
|
|
|
|
5
|
|
Severance pay fund
|
|
|
272
|
|
|
|
257
|
|
Property and equipment, net
|
|
|
10
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Total
non- current assets
|
|
|
287
|
|
|
|
273
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
446
|
|
|
$
|
494
|
|
The accompanying notes
are an integral part of the interim consolidated financial statements.
NANOVIBRONIX, INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (unaudited)
|
U.S. dollars in thousands (except share data)
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Unaudited
|
|
|
Audited
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Trade payables
|
|
$
|
123
|
|
|
$
|
82
|
|
Other accounts payable
|
|
|
508
|
|
|
|
483
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
631
|
|
|
|
565
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
Convertible promissory notes
|
|
|
134
|
|
|
|
-
|
|
Warrants to purchase Common stock
|
|
|
2,114
|
|
|
|
2,079
|
|
Accrued severance pay
|
|
|
370
|
|
|
|
349
|
|
|
|
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
2,618
|
|
|
|
2,428
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIENCY:
|
|
|
|
|
|
|
|
|
Stock capital -
|
|
|
|
|
|
|
|
|
Common stock of $ 0.001 par value -
Authorized: 24,000,000 shares at March 31, 2017 and December 31, 2016; Issued and outstanding: 2,632,710 and 2,632,710 shares at March 31, 2017 and December 31, 2016, respectively.
|
|
|
2
|
|
|
|
2
|
|
Series C Preferred stock of $ 0.001 par value -
|
|
|
|
|
|
|
|
|
Authorized: 5,500,000 shares at March 31, 2017 and December 31, 2016; Issued and outstanding: 1,951,261 shares at March 31, 2017 and December 31, 2016, respectively
|
|
|
2
|
|
|
|
2
|
|
Additional paid-in capital
|
|
|
21,487
|
|
|
|
20,073
|
|
Accumulated deficit
|
|
|
(24,294
|
)
|
|
|
(22,576
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders' deficiency
|
|
|
(2,803
|
)
|
|
|
(2,499
|
)
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' deficiency
|
|
$
|
446
|
|
|
$
|
494
|
|
The accompanying notes are an integral part
of the interim consolidated financial statements.
NANOVIBRONIX, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
|
U.S. dollars in thousands
|
|
|
Three months ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
52
|
|
|
$
|
57
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
16
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
36
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
150
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
|
94
|
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
593
|
|
|
|
245
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
838
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
802
|
|
|
|
474
|
|
|
|
|
|
|
|
|
|
|
Financial expense, net
|
|
|
64
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes on income
|
|
|
866
|
|
|
|
486
|
|
|
|
|
|
|
|
|
|
|
Taxes on income
|
|
|
11
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
877
|
|
|
$
|
495
|
|
|
|
|
|
|
|
|
|
|
Deemed dividend related to extension of February 2015 warrants to Common stock in January 2017
|
|
|
841
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss attributable to holders of Common Stock
|
|
$
|
1,718
|
|
|
$
|
495
|
|
|
|
|
|
|
|
|
|
|
Net Common stock and Preferred C stock basic and diluted loss per share (Note 8)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of Common stock and Preferred C stock used in computing basic and diluted net loss per share (Note 8)
|
|
|
4,583,971
|
|
|
|
4,572,452
|
|
The accompanying notes are an integral part of the interim consolidated
financial statements.
NANOVIBRONIX, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
|
U.S. dollars in thousands (except share data)
|
|
|
Preferred
C stocks
|
|
|
Common
stocks
|
|
|
Additional
paid-in
|
|
|
Accumulated
|
|
|
Total
stockholders'
equity
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
(deficiency)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2016
|
|
|
1,951,261
|
|
|
$
|
2
|
|
|
|
2,611,328
|
|
|
$
|
2
|
|
|
$
|
19,521
|
|
|
$
|
(19,734
|
)
|
|
$
|
(209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common stocks
upon exercise of options
|
|
|
-
|
|
|
|
-
|
|
|
|
12,382
|
|
|
|
|
*)
|
|
|
33
|
|
|
|
-
|
|
|
|
33
|
|
Issuance of Common stocks
to consultant
|
|
|
-
|
|
|
|
-
|
|
|
|
9,000
|
|
|
|
|
*)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation
related to options granted to employees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
459
|
|
|
|
-
|
|
|
|
459
|
|
ASU 2016-09 adoption,
Note 2t
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11
|
|
|
|
(11
|
)
|
|
|
-
|
|
Stock-based compensation
related to restricted stocks granted to consultant
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49
|
|
|
|
-
|
|
|
|
49
|
|
Total
comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,831
|
)
|
|
|
(2,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December
31, 2016
|
|
|
1,951,261
|
|
|
|
2
|
|
|
|
2,632,710
|
|
|
|
2
|
|
|
|
20,073
|
|
|
|
(22,576
|
)
|
|
|
(2,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
related to options granted to employees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
351
|
|
|
|
-
|
|
|
|
351
|
|
Issuance of warrants to
Common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
222
|
|
|
|
-
|
|
|
|
222
|
|
Deemed dividend related
to extension of February 2015 warrants to Common stock in January 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
841
|
|
|
|
(841
|
)
|
|
|
-
|
|
Total
comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(877
|
)
|
|
|
(877
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March
31, 2017 (unaudited)
|
|
|
1,951,261
|
|
|
|
2
|
|
|
|
2,632,710
|
|
|
|
2
|
|
|
|
21,487
|
|
|
|
(24,294
|
)
|
|
|
(2,803
|
)
|
*) Represents an amount lower than $ 1.
The accompanying notes are an integral part
of the interim consolidated financial statements
NANOVIBRONIX, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
U.S. dollars in thousands
|
|
|
Three months ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Unaudited
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(877
|
)
|
|
$
|
(495
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1
|
|
|
|
2
|
|
Stock-based compensation
|
|
|
351
|
|
|
|
65
|
|
Benefit component of Promissory Notes
|
|
|
5
|
|
|
|
-
|
|
Revaluation of warrants to purchase Common stock
|
|
|
35
|
|
|
|
1
|
|
Decrease (increase) in trade receivables
|
|
|
2
|
|
|
|
(6
|
)
|
Decrease (increase) in prepaid expenses and other accounts receivable
|
|
|
(2
|
)
|
|
|
32
|
|
Decrease (increase) in inventories
|
|
|
7
|
|
|
|
(5
|
)
|
Increase (decrease) in trade payables
|
|
|
42
|
|
|
|
(15
|
)
|
Increase in other accounts payable
|
|
|
23
|
|
|
|
47
|
|
Increase in accrued severance pay, net
|
|
|
6
|
|
|
|
12
|
|
Accrued interest on Promissory Notes
|
|
|
2
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(405
|
)
|
|
|
(362
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investment activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investment activities
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Convertible Promissory Note and warrants
|
|
|
350
|
|
|
|
-
|
|
Proceeds from exercise of options
|
|
|
-
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
350
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
|
(55
|
)
|
|
|
(336
|
)
|
Cash and cash equivalents at the beginning of the period
|
|
|
106
|
|
|
|
1,614
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
51
|
|
|
$
|
1,278
|
|
The accompanying notes are an integral part
of the interim consolidated financial statements.
NANOVIBRONIX, INC. AND
ITS SUBSIDIARY
|
a.
|
NanoVibronix, Inc. ("the Company"), a U.S. (Delaware) corporation, commenced operations on October 20, 2003 and is a medical device company focusing on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals.
|
|
|
|
|
|
The Company's principal research and development activities are conducted in Israel through its wholly-owned subsidiary, NanoVibronix (Israel 2003) Ltd., a company registered in Israel, which commenced operations in October 2003.
|
|
b.
|
The Company’s ability to continue to
operate is dependent mainly on its ability to successfully market and sell its products and the receipt of additional financing
until profitability is achieved. The Company has incurred losses in the amount of $877 during the three month period ended March
31, 2017, has an accumulated deficit of $23,453 as of March 31, 2017 and accumulated negative cash flow from operating activities
in the amount of $405. The Company expects to continue incurring losses and negative flows from operations. As a result, the Company
will not have sufficient resources to fund its operations for the next twelve months. These conditions raise substantial doubts
about the Company’s ability to continue as a going concern. During the next twelve months management expects that the Company
will need to raise additional capital to finance its losses and negative cash flows from operations and may continue to be dependent
on additional capital raising as long as its products do not reach commercial profitability. Management’s plans include the
continued commercialization of the Company’s products and raising capital through the sale of additional equity securities,
debt or capital inflows from strategic partnerships. There are no assurances, however, that the Company will be successful in obtaining
the level of financing needed for its operations. If the Company is unsuccessful in commercializing its products and raising capital,
it will need to reduce activities, curtail or cease operations. The financial statements do not include any adjustments with respect
to the carrying amounts of assets and liabilities and their classification that might be necessary should the Company be unable
to continue as a going concern.
In the opinion of management,
the accompanying unaudited interim consolidated financial statements reflect all adjustments, which include only normal recurring
adjustments, necessary to state fairly the financial position and results of operations of the Company. These consolidated financial
statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements
for the year ended December 31, 2016, as found in the Company’s Annual Report on Form 10-K, filed with the Securities and
Exchange Commission on March 31, 2017. The balance sheet for December 31, 2016 was derived from the Company’s audited financial
statements for the year ended December 31, 2016. The results of operations for the three months ended March 31, 2017 are not necessarily
indicative of results that could be expected for the entire fiscal year.
|
|
c.
|
On February 9, 2015, the Company filed a Registration Statement on Form 10 under the Securities Exchange Act of 1934, as amended, to register its Common stock under Section 12(g) of that act. The Form 10 was effective on April 10, 2015.
|
|
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES
|
The significant accounting policies
applied in the annual consolidated financial statements of the Company as of December 31, 2016 are applied consistently in these
financial statements.
|
NOTE
3:-
|
UNAUDITED
INTERIM FINANCIAL STATEMENTS
|
The accompanying unaudited consolidated
financial statements as of March 31, 2017 have been prepared in accordance with the U.S. generally accepted accounting principles
for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted
accounting principles in the United States for complete financial statements. In the opinion of management, the unaudited interim
consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the
Company’s consolidated financial position as of March 31, 2017 and the Company’s consolidated results of operation
and the consolidated cash flows for the three months ended March 31, 2017.
|
NOTE
4:-
|
FAIR
VALUE MEASUREMENTS
|
ASC 820, "Fair Value Measurements
and Disclosures" ("ASC 820"), defines fair value as the price that would be received from selling an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair
value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most
advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset
or liability, such as inherent risk, transfer restrictions and risk of nonperformance.
NANOVIBRONIX, INC. AND ITS SUBSIDIARY
ASC 820 also establishes a fair
value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. A financial instrument's categorization within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair
value.
|
Level 1 -
|
quoted prices in active markets for identical assets or liabilities;
|
|
Level 2 -
|
inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or
|
|
Level 3 -
|
unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
During February 2013, the Company
signed a convertible Promissory Notes agreement (the “Agreement”) pursuant to which the Company issued secured convertible
Promissory Notes (the “Notes”) to certain investors on February 5, 2013. On each of March 28, 2013, June 3, 2013,
August 5, 2013, October 7, 2013, December 9, 2013, February 6, 2014, April 1, 2014, May 15, 2014, June 16, 2014, August 7, 2014,
September 7, 2014, October 13, 2014, November 19, 2014 and December 11, 2014, the Agreement and the Notes were amended and restated
to increase the principal amount by $100. In addition, with each amendment, the Company issued to the holders of the Note
warrants to purchase up to 37,594 shares of common stock in consideration for an additional $100 per amendment. The exercise price
at which the warrants may be exercised is $2.66 per share, subject to adjustment for stock splits, fundamental transactions or
similar events including "down round" protection. The warrants expire within a period of five years, based on the issuance
date.
In April 2015, the holders of the
Notes elected to convert the outstanding principal and interest thereunder into shares of the Company’s series C preferred
stock. On that date, an aggregate principal balance of $1,500 and $106 in accrued interest were converted into 603,769 shares of
series C preferred stock. The shares of series C preferred stock were not registered under the Securities Act of 1933, as
amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities
Act of 1933, as amended, provided by Section 3(a)(9) of the Securities Act of 1933, as amended.
The Company measures the warrants
at fair value by applying the Black-Scholes option pricing model in each reporting period until they are exercised or expired,
with changes in fair value being recognized in the Company’s consolidated statement of comprehensive loss as financial income
or expense.
In estimating the warrants' fair
value, the Company used the following assumptions:
|
|
March 31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Dividend yield
(1)
|
|
0%
|
|
0%
|
Expected volatility
(2)
|
|
49.1%-64.74%
|
|
63.2%-67.1%
|
Risk-free interest
(3)
|
|
1.00%-1.43%
|
|
0.77%-0.88%
|
Expected term (years)
(4)
|
|
0.9-2.7
|
|
1.7-3.6
|
|
(1)
|
Dividend yield - was based on the fact that the Company has not paid dividends to its stockholders in the past and does not expect to pay dividends to its stockholders in the future.
|
|
(2)
|
Expected volatility - was calculated based on actual historical stock price movements of companies in the same industry over a term that is equivalent to the expected term of the warrants.
|
|
(3)
|
Risk-free interest – was based on yield rate of non-index linked U.S. Federal Reserve treasury stock.
|
|
(4)
|
Expected term - was based on the maturity date of the warrants.
|
Fair value measurement using significant
unobservable inputs (Level 3):
|
|
Fair value of
warrants
to Common stock
|
|
|
|
|
|
Balance at January 1, 2017
|
|
$
|
2,079
|
|
Change in fair value of warrants
|
|
|
35
|
|
|
|
|
|
|
Balance at March 31, 2017
|
|
$
|
2,114
|
|
NANOVIBRONIX, INC. AND ITS SUBSIDIARY
Effective as of January 27,
2017, the Company entered into amendments to its two-year warrants (the “Warrant Amendment”) to purchase an aggregate
of 420,000 shares of common stock at an exercise price of $3.00 per share and warrants to purchase an aggregate of 420,000 shares
of common stock at an exercise price of $6.00 per share, issued in January and February 2015, to extend the expiration date of
the warrants for two additional years. Pursuant to the Warrant Amendment, warrants to purchase 266,667 shares of common stock at
$3.00 per share and warrants to purchase 266,667 shares of common stock at $6.00 per share were to expire on January 29, 2019,
and the warrants to purchase 140,000 shares of common stock at $3.00 per share and warrants to purchase 140,000 shares of common
stock at $6.00 per share were to expire on February 10, 2019, and the warrants to purchase 13,333 shares of common stock at $3.00
per share and warrants to purchase 13,333 shares of common stock at $6.00 per share were to expire on February 23, 2019. The exercise
price and all other terms of the original warrants remain the same. Since substantially all of the warrants to purchase 840,000
shares of common stock subject to the Warrant Amendment are held by the Company's stockholders, the Warrant Amendment was accounted
for as “deemed dividend,” which was measured at the amount equal to the incremental value reflecting the change in
the fair value of the warrants before and after the Warrant Amendment. Accordingly, a deemed dividend in the amount of $841 was
recorded to the Statement of Changes in Stockholders' Deficiency as an increase in additional paid-in capital with a corresponding
increase in the accumulated deficit.
In March 2017, the Company
completed a bridge financing, pursuant to which the Company received from four investors $350 of loans and issued to the investors
convertible promissory notes (the “2017 Notes”) in an aggregate principal amount of $350 and seven-year warrants (the
“Warrants”) to purchase an aggregate of 140,000 shares of common stock at an exercise price of $5.90 per share (the
“Exercise Price”) (see Note 5). The Company measured the Warrants at fair value on their issuance date by applying
the Black-Scholes options pricing model, according to the following assumptions:
|
|
March 31,
|
|
|
2017
|
|
|
|
Dividend yield
(1)
|
|
0%
|
Expected volatility
(2)
|
|
65.16%-65.80%
|
Risk-free interest
(3)
|
|
2.23%-2.27%
|
Expected term (years)
(4)
|
|
7
|
|
(1)
|
Dividend yield - was based on the fact that the Company has not paid dividends to its stockholders in the past and does not expect to pay dividends to its stockholders in the future.
|
|
(2)
|
Expected volatility - was calculated based on actual historical stock price movements of companies in the same industry over a term that is equivalent to the expected term of the warrants.
|
|
(3)
|
Risk-free interest – was based on yield rate of non-index linked U.S. Federal Reserve treasury stock.
|
|
(4)
|
Expected term - was based on the maturity date of the warrants.
|
In addition, the Company’s
financial instruments also include cash and cash equivalents, trade receivables, prepaid expenses and other accounts receivable,
trade payables and other accounts payable. The fair value of these financial instruments was not materially different from their
carrying values as of March 31, 2017 due to the short-term maturities of such instruments.
|
NOTE
5:-
|
CONVERTIBLE
PROMISSORY NOTES
|
On March
1 and March 23, 2017, the Company completed bridge financings, pursuant to which the Company received from four accredited investors
an aggregate of $350 of loans and issued to the investors the 2017 Notes in an aggregate principal amount of $350 and seven-year
Warrants to purchase an aggregate of 140,000 shares of common stock at the Exercise Price of $5.90 per share.
The principal
amount and all accrued but unpaid interest on the 2017 Notes will become due and payable on the date (the “Maturity
Date”) that is the earlier of the (i) 5-year anniversary of the date of issuance, or (ii) the date the Company completes
an equity financing pursuant to which the Company issues and sells shares of capital stock resulting in aggregate proceeds of at
least $2,000 (a “Qualified Financing”). The 2017 Notes bear interest at a rate of 6% per annum, payable on the Maturity
Date. To the extent not previously converted, on the Maturity Date, each investor will receive, at the option of the investor,
either (a) cash equal to the original principal amount of the 2017 Notes and interest then accrued and unpaid thereon, or (b) shares
of common stock or Series C Convertible Preferred Stock of the Company, at a price per share equal to the lesser of: (x) 80% of
the amount equal to the quotient obtained by dividing (i) the estimated value of the Company as of the Maturity Date, as determined
in good faith by the Company’s board of directors, by (ii) the aggregate number of outstanding shares of the Company’s
common stock, as of the Maturity Date on a fully diluted basis, and (y) $5.90 per share, as such amount may be adjusted for any
stock split, stock dividend, reclassification or similar events affecting the capital stock of the Company. Upon consummation of
a Qualified Financing, the investors may elect to have the outstanding principal and accrued but unpaid interest thereon converted
into shares of the same class and series of equity securities sold in such Qualified Financing, provided that the investor may
elect to receive shares of Series C Convertible Preferred Stock instead of shares of common stock, to the extent that common stock
are issued in such Qualified Financing, at a price per share equal to the lesser of: (a) 80% of the price per share at which such
securities are sold in such Qualified Financing and (b) $5.90 per share, as such amount may be adjusted for any stock split, stock
dividend, reclassification or similar events affecting the Company’s capital stock. If there is a change of control and the
2017 Notes have not been previously converted otherwise, the investors may, at their option, (a) receive an amount in cash equal
to the sum of the original principal amount of the 2017 Notes and interest then accrued and unpaid thereon, or (b) convert the
2017 Notes and all accrued and unpaid interest thereon into shares of common stock or Series C Convertible Preferred Stock of the
Company immediately prior to the closing of such change of control transaction at a price per share equal to the lesser of: (x)
80% of the amount equal to the quotient obtained by dividing (i) the estimated value of the Company implied by the exchange
ratio set forth in the agreement governing such change of control transaction, as determined in good faith by the Company’s
board of directors, by (ii) the aggregate number of outstanding shares of the Company’s common stock, immediately prior
to such change of control on a fully diluted basis, and (y) $5.90 per share, as such amount may be adjusted for any stock split,
stock dividend, reclassification or similar events affecting the Company’s capital stock.
As a result of issuing the
warrants and as a result of the discount on the conversion price of the 2017 Notes, the Company recorded in the quarter ended
March 31, 2017 a benefit component in the amount of $ 222, to be amortized over the life of the 2017 Notes.
NANOVIBRONIX, INC. AND
ITS SUBSIDIARY
|
NOTE
6:-
|
STOCKHOLDERS’
DEFICIENCY
|
Stock based compensation
During the three-month period ended
March 31, 2017 and 2016, the Company recorded share based compensation in a total amount of $351 and $65, respectively.
In connection with the resignation of a director from our
board of directors, on March 30, 2017, we amended the option agreement, dated March 25, 2015, we entered into an agreement with
the resigned director for the grant of an option to purchase 30,000 shares of common stock at an exercise price of $2.57 per share,
all of which have vested, and the option agreement, dated July 18, 2016, for the grant of an option to purchase 40,000 shares of
common stock at an exercise price of $5.35 per share, all of which were vesting on July 18, 2017, to (i) accelerate the vesting
of the option granted to the director in 2016 so that it will be fully vested as of March 30, 2017, and (ii) permit the director
to exercise the options granted in 2015 and 2016 at any time prior to the expiration of the option period as set forth in the applicable
option agreement. This modification resulted in additional share based compensation expense of $98 in the quarter ended March 31,
2017.
As of March 31, 2017, the total unrecognized
estimated compensation cost related to non-vested stock options granted prior to that date was $865, which is expected to be recognized
over a weighted average period of approximately
3.4 years.
|
NOTE
7:-
|
COMMITMENTS
AND CONTINGENT LIABILITIES
|
|
|
The
Company leases office facilities and motor vehicles under operating leases, which expire on various dates, the latest of
which is July 31, 2017.
|
Future minimum lease commitments
under non-cancelable operating lease agreements as of March 31, 2017 are as follows:
Nine months ending December 31,
|
|
Operating leases
|
|
|
|
|
|
2017
|
|
$
|
9
|
|
|
|
|
|
|
Total
|
|
$
|
9
|
|
The Company leases motor vehicles
under cancelable lease agreements. The Company has an option to be released from this lease agreement, which may result in penalties
in a maximum amount of approximately $5.
Rent and related expenses were $6
and $8 for the three months ended March 31, 2017 and 2016, respectively.
Motor vehicle
leases and related expenses were $5 and $8 for the three months ended March 31, 2017 and 2016, respectively.
|
b.
|
Royalties to the Office of the Chief Scientist ("the OCS"):
|
Under the Company's subsidiary research
and development agreements with the OCS and pursuant to applicable laws, the Company is required to pay royalties at the rate of
3-3.5% of sales of products developed with funds provided by the OCS, up to an amount equal to 100% of the OCS research and development
grants received, linked to the dollar including accrued interest at the LIBOR rate. The Company is obligated to repay the Israeli
Government for the grants received only to the extent that there are sales of the funded products.
As of March 31, 2017, there are
no sales from the funded project and the Company has a contingent obligation to pay royalties in the principal amount of approximately
$ 492. In addition, the OCS may impose certain conditions on any arrangement under which it permits the Company to transfer
technology or development out of Israel.
NANOVIBRONIX, INC. AND
ITS SUBSIDIARY
All outstanding share options and
warrants for the three months ended March 31, 2017 and 2016 have been excluded from the calculation of the diluted net loss per
share because all such securities are anti-dilutive for all periods presented.
Retrospective adjustment of
net loss per share information
The Company has shares of Series
C Preferred Stock outstanding which were issued in early 2015. The specific terms and conditions of the Series C Preferred Shares
are disclosed in Note 10 to the Company’s December 31, 2015 audited consolidated financial statements which should be read
along with these unaudited interim consolidated financial statements.
When preparing its consolidated
financial statements for the year ended December 31, 2015, its interim consolidated financial statements for the respective quarters
and year to date periods contained during 2015, and also the interim consolidated financial statements for the quarter ended March
31, 2016, the Company considered these convertible security to be a common stock equivalents but excluded them from its dilutive
earnings (loss) per share computation as it concluded that the securities would be anti-dilutive in nature if or when converted.
However, upon further analysis and when preparing it interim consolidated financial statements for the second quarter of 2016,
the Company has concluded that these securities participate equally with common shares in the profits, losses and liquidation values
of the Company, and while limited in voting they can be readily converted into voting common shares at any time. The Company has
concluded that they are participating securities that should have been included as a component of both basic and dilutive earnings
(loss) per share for all periods previously presented. Adjusted figures are presented below to reflect this revised conclusion.
|
|
Quarter
ended
March 31,
2015
|
|
|
Quarter
ended
June 30,
2015
|
|
|
Six months
ended
June 30,
2015
|
|
|
Quarter
ended
September
30, 2015
|
|
|
Nine months
ended
September
30, 2015
|
|
|
Year ended
December
31, 2015
|
|
|
Quarter
ended
March 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
630
|
|
|
|
434
|
|
|
|
1,064
|
|
|
|
1,039
|
|
|
|
2,103
|
|
|
|
2,884
|
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares as previously reported
|
|
|
281,543
|
|
|
|
2,388,220
|
|
|
|
1,336,085
|
|
|
|
2,611,328
|
|
|
|
1,767,417
|
|
|
|
1,978,395
|
|
|
|
2,621,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average Series C Preferred shares outstanding
|
|
|
460,127
|
|
|
|
1,839,468
|
|
|
|
1,151,216
|
|
|
|
1,951,261
|
|
|
|
1,421,819
|
|
|
|
1,557,953
|
|
|
|
1,951,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and dilutive weighted average shares outstanding, as adjusted
|
|
|
741,670
|
|
|
|
4,227,688
|
|
|
|
2,487,301
|
|
|
|
4,562,589
|
|
|
|
3,189,236
|
|
|
|
3,536,348
|
|
|
|
4,572,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and dilutive loss per share, as adjusted
|
|
|
(0.85
|
)
|
|
|
(0.10
|
)
|
|
|
(0.43
|
)
|
|
|
(0.23
|
)
|
|
|
(0.66
|
)
|
|
|
(0.82
|
)
|
|
|
(0.11
|
)
|
The Company has retrospectively
adjusted for the foregoing matter in the accompanying interim consolidated financial statements for the three months ended March
31, 2016.
NANOVIBRONIX, INC. AND ITS SUBSIDIARY
|
NOTE
9:-
|
GEOGRAPHIC
INFORMATION AND MAJOR CUSTOMER DATA
|
Summary information about geographic
areas:
The Company manages its business
on the basis of one reportable segment, and derives revenues from selling its products directly to patients as well as through
distributor agreements. The following is a summary of revenues within geographic areas:
|
|
Three months ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
20
|
|
|
$
|
19
|
|
Europe
|
|
|
16
|
|
|
|
21
|
|
Israel
|
|
|
-
|
|
|
|
1
|
|
India
|
|
|
3
|
|
|
|
6
|
|
Rest of the world
|
|
|
12
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51
|
|
|
$
|
57
|
|
During the three month period ended
March 31, 2017 and 2016, revenues from distributors accounted for 35% and 40% of total revenues, respectively
The Company's long-lived assets
are all located in Israel.
|
NOTE
10:-
|
SUBSEQUENT
EVENTS
|
The Company evaluates events or
transactions that occur after the balance sheet date but prior to the issuance of financial statements to provide additional evidence
relative to certain estimates or to identify matters that require additional disclosure. For its interim consolidated financial
statements as of March 31, 2017 (unaudited) and for the three months period then ended (unaudited), the Company evaluated subsequent
events through May 15, 2017 the date that the consolidated financial statements were issued.
In May 2017, the Company completed
an additional bridge financing, pursuant to which the Company received from two investors $130 of loans and issued to the investors
convertible promissory notes in an aggregate principal amount of $130 and seven-year warrants to purchase an aggregate of 52,000
shares of common stock at an exercise price of $5.90 per share. The material terms of the notes and the warrants issued in the
additional bridge financing are identical to the material terms of the notes and the warrants issued in the bridge financings
closed in March 2016.