QTREX Quantum Ltd 6-K, filed Oct 27, 2021
QTREX Quantum Ltd. (QTEX)
About this 6-K
QTREX Quantum Ltd filed this 6-K on October 27, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the Month of: October 2021 (Report No. 3)
Commission
File Number:
(Translation of registrant’s name into English)
2 Ha-Tidhar St.
Ra’anana 4366504, Israel
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
☒ Form 20-F ☐ Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
CONTENTS
This Report of Foreign Private Issuer on Form 6-K consists of the Registrant’s (i) Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2021, which is attached hereto as Exhibit 99.1; and (ii) Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2021, which is attached hereto as Exhibit 99.2.
The contents of this Form 6-K are incorporated by reference into the Company’s registration statement on Form S-8 (File No. 333-259057), filed with the SEC, to be a part thereof from the date on which this Form 6-K is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
| Exhibit No. | ||
| 99.1 | Inspira Technologies Oxy B.H.N. Ltd.’s Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2021. | |
| 99.2 | Inspira Technologies Oxy B.H.N. Ltd.’s Management’s Discussion and Analysis of Financial Condition and Results of Operation for the Six Months Ended June 30, 2021. | |
| EX-101.INS | Inline XBRL Taxonomy Instance Document | |
| EX-101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| EX-101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | |
| EX-101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| EX-101.LAB | Inline XBRL Taxonomy Label Linkbase Document | |
| EX-101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Inspira Technologies Oxy B.H.N. Ltd. | |||
| Date: October 27, 2021 | By: | /s/ Dagi Ben-Noon | |
| Name: | Dagi Ben-Noon | ||
| Title: | Chief Executive Officer | ||
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Exhibit 99.1
INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
INTERIM CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2021
UNAUDITED
_______________________
________________
____________
INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
(UNAUDITED)
TABLE OF CONTENTS
i
INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF FINANCIAL POSITION
(US dollars in thousands)
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | - | |||||||
| Other accounts receivable | ||||||||
| Total current assets | ||||||||
| Non-Current Assets: | ||||||||
| Right of use assets, net | ||||||||
| Property, plant and equipment, net | ||||||||
| Total non-current assets | ||||||||
| Total Assets | ||||||||
The accompanying notes are an integral part of the financial statements.
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF FINANCIAL POSITION
(US dollars in thousands)
| June 30, | December 31, | |||||||||
| Note | 2021 | 2020 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||||
| Current Liabilities: | ||||||||||
| Trade accounts payables | ||||||||||
| Other accounts payable | ||||||||||
| Lease liabilities | ||||||||||
| Financial Liabilities at Fair Value | 4 | |||||||||
| Total current liabilities | ||||||||||
| Non-Current Liabilities: | ||||||||||
| Lease liabilities | ||||||||||
| Financial Liabilities at Fair Value | 4 | - | ||||||||
| Loan from the Israeli Innovation Authority | ||||||||||
| Total non- current liabilities | ||||||||||
| Deficit: | ||||||||||
| Share capital and premium | 3 | |||||||||
| Foreign exchange reserve | ( | ) | ( | ) | ||||||
| share base compensation | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total deficit | ( | ) | ( | ) | ||||||
| Total Liabilities And Deficit | ||||||||||
| October 13, 2021 | ||||
|
Joe Hayon Chief Financial Officer |
Dagi Ben-Noon Chief Executive Officer |
Date of approval of financial statements |
The accompanying notes are an integral part of the financial statements.
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(US dollars in thousands)
| Six months ended June 30, | Six months ended June 30, | |||||||
| 2021 | 2020 | |||||||
| Research and development expenses | ||||||||
| Sales and marketing expenses | - | |||||||
| General and administrative expenses | ||||||||
| Operating loss | ||||||||
| Finance expense | ||||||||
| Loss before tax | ||||||||
| Taxes on income | ||||||||
| Total net loss | ||||||||
| Other comprehensive loss, net of tax: | ||||||||
| Items that will not be reclassified to profit or loss: | ||||||||
| Exchange losses arising on translation to presentation currency | ||||||||
| Total comprehensive loss | ||||||||
| Basic and diluted loss per share (*) | ( | ) | ( | ) | ||||
| (*) |
The accompanying notes are an integral part of the financial statements.
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
(US dollars in thousands)
For the six months ended June 30, 2021:
| Share capital | Premium | Adjustments arising from translating financial operation | Share-based payment reserve | Accumulated deficit | Total | |||||||||||||||||||
| Balance at January 1, 2021: | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Changes during the period: | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Total comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Per value cancellation | ( | ) | ||||||||||||||||||||||
| Options exercise | - | ( | ) | |||||||||||||||||||||
| Share base compensation | - | |||||||||||||||||||||||
| Balance at June 30, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
For the six months ended June 30, 2020:
| Share capital | Adjustments arising from translating financial operation | Share-based payment reserve | Accumulated deficit | Total | ||||||||||||||||
| Balance at January 1, 2020: | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Changes during the period: | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||
| Total comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||
| Share base compensation | - | |||||||||||||||||||
| Balance at June 30, 2020 | ( | ) | ( | ) | ( | ) | ||||||||||||||
The accompanying notes are an integral part of the financial statements.
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF CASH FLOWS
(US dollars in thousands)
| Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Increase in other accounts receivable | ( | ) | ( | ) | ||||
| Increase in trade accounts payables | ||||||||
| Increase (decrease) in other accounts payable | ( | ) | ||||||
| Share based compensation | ||||||||
| Change in fair value of Financial Liabilities at Fair Value | ||||||||
| Financial expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Payment of deposit | ( | ) | ( | ) | ||||
| Net cash provided investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Principal paid on lease liabilities | ( | ) | ( | ) | ||||
| Receipt SAFE | ||||||||
| Receipt convertible loan | - | |||||||
| Payment of convertible loan | ( | ) | - | |||||
| Loan from the Israeli Innovation Authority | ||||||||
| Net cash provided financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents at the beginning of the period | ||||||||
| Effects of exchange rate changes on cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at the end of the period | ||||||||
APPENDIX A - AMOUNT PAID DURING THE PERIOD:
| Six-months ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Interest paid | - | | ||||||
The accompanying notes are an integral part of the financial statements.
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(US dollars in thousands)
NOTE 1 – GENERAL:
| 1. | INSPIRA TECHNOLOGIES OXY B.H.N. LTD (formerly: INSENSE MEDICAL LTD) (the “Company”) was incorporated in, Israel and commenced its operations in February 27, 2018. The Company’s functional currency is the New Israeli Shekel (“NIS”). |
The Company operates in the medical technology industry and is developing a proprietary respiratory support device calles “ART system”. The ART system is a cost effective early extracorporeal respiratory support system with an intent to function as an “artificial lung” for deteriorating respiratory patients.
The ART system is designed to utilize a hemo-protective flow approach aimed to rebalance saturation levels while patients are awake and breathing, potentially minimizing the patient's need for mechanical ventilation.
The Company’s product has not yet been tested or used in humans and has not been approved by the U.S. Food and Drug Administration (FDA).
On July 16, 2021, the Company
completed its initial public offering (“IPO”) on Nasdaq Capital Market whereby he company
sold
On July 16, 2021, following the IPO, the Company issues
| 2. | The Company did not generate any revenue since its inception, the Company is still at the development stage of its products. The company's
operating loss for the six-months ended June 30, 2020 and 2021 were $ |
The management of the Company intends to seek additional funding through public offerings, which will be utilized to fund product development and continue operations. The Company does not have any material financial obligations as of the balance date.
This may raise substantial doubts about the company ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| 3. | The global pandemic resulting from the disease known as COVID-19, caused by a novel strain of coronavirus, SARS-CoV-2, has caused national and global economic and financial market disruptions and may adversely impact our business. Although the Company continued to operate almost fully including carrying out the studies in compliance with all applicable Israeli rules and guidelines on COVID-19, the employees worked remotely when full lockdowns were enforced. The spread of an infectious disease, including COVID-19, may also result in the inability of the manufacturers to deliver components or finished products on a timely basis and may result in the inability of the Company’s suppliers to deliver the parts required by the manufacturers to complete manufacturing of components or finished products. The Company cannot predict the duration or magnitude of the pandemic or the full impact that it may have on the Company’s operations and workforce, including the Company’s research and clinical trials and its ability to raise capital, which in turn could have an adverse impact on the Company’s business, financial condition and results of operation. |
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(US dollars in thousands)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES:
Basis of preparation
These interim condensed financial statements have been prepared in accordance with the International Accounting Standards (the “IAS”) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB). They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2020 annual financial statements filed with the Company’s registration statement on Form F-1 (file no. 333-253920) declared effective by the U.S. Securities and Exchange Commission on July 13, 2021. The Company has applied the same accounting policies and methods of computation in its interim financial statements as in its 2020 annual financial statements.
Impact of accounting standards to be applied in future periods
There are a number of standards and interpretations which have been issued by the IAS Board that are effective for periods beginning subsequent to December 31, 2021 (the date on which the Company’s next annual financial statements will be prepared up to) that the Company has decided not to adopt early. The Company does not believe these standards and interpretations will have a material impact on the financial statements once adopted.
NOTE 3 – SIGNIFICANT EVENTS AND TRANSACTIONS IN THE PERIOD:
General:
| 1. | On March 18, 2021, |
| 2. | On June 1, 2021 the Company’s shareholders approved an amendment to the structure of the Company’s share capital (both
authorized and issued) by cancelling the par value of the Company’s shares such that each Ordinary Share with par value of NIS |
| 3. | On June 1 ,2021 the Company’s shareholders approved an increase in the authorized share capital of the company to |
Following the share splits and the cancellation of the par value, all Ordinary Shares, options, financial liabilities at fair value, warrants, exercise prices and per share data have been adjusted retroactively for all periods presented in these financial statements.
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(US dollars in thousands)
NOTE 4 – FINACIAL LIABILITIES VALUE:
June 30, 2021 | December 31, 2020 | |||||||
| Warrants | ( | ) | ( | ) | ||||
| SAFE | ( | ) | ( | ) | ||||
| Convertible loan | ( | ) | - | |||||
| Total | ( | ) | ( | ) | ||||
| 1. | Simple Agreements for Future Equity, or SAFEs |
In December 2020 through March 2021, the Company entered into certain equity investment agreements, which known as simple agreements
for future equity, (“SAFEs”), for aggregate proceeds of
Out of the amounts the company received under
the SAFEs,
In addition, if the subscription amounts under the SAFEs is converted
to Ordinary Shares in connection with an initial public offering, then the company will issue the SAFE investors warrants to purchase
the Company’s Ordinary Shares with an exercise price equal to the
The remaining
The SAFE was designated to be measured at fair value through profit or loss.
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(US dollars in thousands)
NOTE 4 – FINACIAL LIABILITIES VALUE (Cont.):
| 2. | Convertible loan |
In January through March 2021, the Company entered
into convertible loan agreements for the aggregate amount of
In May 2021, the Company offered an extension with a maturity date
of
The convertible loan was agreements were designated to be measured at fair value through profit or loss.
NOTE 5 – SHARE BASED COMPENSATION:
On December, 2019, the Company established a share option plan (the
“Plan”). Under the Plan, as of June 31, 2021 a total of
On February 21, 2021, the Company’s board of directors granted
a total of
On March 16, 2021, the Company’s board of directors granted a
total of
The fair value of all granted options was estimated by using the Black Scholes model, which was aimed to model the value of the Company’s assets over time. The simulation approach was designed to take into account the terms and conditions of the share options, as well as the capital structure of the Company and the volatility of its assets, on the date of grant based on certain assumptions. Those conditions are, among others:
| (i) | The expected volatility is 50%; |
| (ii) | The dividend rate 0%; and |
The valuation was completed with the assistance of an external valuator based on management’s assumptions.
During the six months ended June 30, 2021, the Company recorded share-based
payment expenses in the amount of
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(US dollars in thousands)
NOTE 5 – SHARE BASED COMPENSATION (Cont.):
The options to services providers and advisers outstanding as of June 30, 2021, as follows:
| Six months ended June 30, 2021 | ||||||||
| Number of options | Weighted average Exercise price NIS | |||||||
| Outstanding at beginning of year | ||||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Outstanding as of June 30, 2021 | ||||||||
| Exercisable options | ||||||||
The options to employees and directors outstanding as of June 30, 2021, as follows:
| Six months ended June 30, 2021 | ||||||||
| Number of options | Weighted average Exercise price NIS | |||||||
| Outstanding at beginning of year | ||||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Outstanding as of June 30, 2021 | ||||||||
| Exercisable options | ||||||||
NOTE 6 – FAIR VALUE MEASUREMENT:
Fair value hierarchy
The following tables detail the Company’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
| At June 30, 2021: | Level 3 | |||
| Warrants | ( | ) | ||
| SAFE | ( | ) | ||
| Convertible loan | ( | ) | ||
| Total | ( | ) | ||
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INSPIRA TECHNOLOGIES OXY B.H.N. LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(US dollars in thousands)
NOTE 6 – FAIR VALUE MEASUREMENT (Cont.):
| At December 31, 2020: | Level 3 | |||
| Warrants | ( | ) | ||
| SAFE | ( | ) | ||
| Total | ( | ) | ||
As of June 30, 2021, the fair value measurement of the warrant’s securities in the table above, was estimated using the Black Scholes model, based on a variety of significant unobservable inputs and thus represent a level 3 measurement within the fair value hierarchy. The measurement of the SAFE and Convertible loan in the table above, was estimated under the assumption of converting to shares according to the fair value of the shares.
The key inputs that were used in the SAFE, Convertible loan and warrants
valuation were: risk-free interest rate between
As of December 31, 2020, the fair value measurement of the SAFE and the warrant’s securities in the table above, was estimated using the Black Scholes model, based on a variety of significant unobservable inputs a thus represent a level 3 measurement within the fair value hierarchy.
The key inputs that were used in warrants and the SAFE were: the risk-free interest rate-
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-term nature.
Movements in level 3 assets and liabilities during the current and previous financial year are set out below:
| Warrants | SAFE | Convertible loan | ||||||||||
| Balance at December,31 2020 | ||||||||||||
| Gains (losses) recognized in profit or loss | ||||||||||||
| Gains (losses) recognized in other comprehensive loss | ( | ) | ||||||||||
| Additions | ||||||||||||
| Balance at June,30 2021 | ||||||||||||
NOTE 7 – SUBSEQUENT EVENTS:
On August 12, 2021, the Company’s board
of directors resolved to increase the pool of options available under the Plan to
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Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
Certain information included herein may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.
These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate
Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:
| ● | our expectation regarding the sufficiency of our existing cash and cash equivalents to fund our current operations; | |
| ● | our ability to advance the development of our ART and future potential product candidates; | |
| ● | our ability to commercialize our ART and future potential product candidates and future sales of our ART or any other future potential product candidates; | |
| ● | our assessment of the potential of our ART and future potential product candidates to treat certain indications; | |
| ● | our planned level of capital expenditures and liquidity; | |
| ● | our plans to continue to invest in research and development to develop technology for new products; | |
| ● | anticipated actions of the U.S. Food and Drug Administration, or the FDA, state regulators, if any, or other similar foreign regulatory agencies, including approval to conduct clinical trials, the timing and scope of those trials and the prospects for regulatory approval or clearance of, or other regulatory action with respect to our products or services; | |
| ● | the regulatory environment and changes in the health policies and regimes in the countries in which we intend to operate, including the impact of any changes in regulation and legislation that could affect the medical device industry; | |
| ● | our ability to meet our expectations regarding the commercial supply of our ART and future product candidates; | |
| ● | our ability to retain key executive members; | |
| ● | our ability to internally develop new inventions and intellectual property; |
| ● | the overall global economic environment; | |
| ● | the impact of COVID-19 and resulting government actions on us; | |
| ● | the impact of competition and new technologies; | |
| ● | general market, political and economic conditions in the countries in which we operate; | |
| ● | the impact of competition and new technologies; | |
| ● | our ability to internally develop new inventions and intellectual property; | |
| ● | our expectations regarding the use of proceeds from this offering | |
| ● | changes in our strategy; and | |
| ● | litigation. |
These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. For a more detailed description of the risks and uncertainties affecting our company, reference is made to our registration statement on Form F-1, which was declared effective by the Securities and Exchange Commission, or the SEC, on July 13, 2021, or the Registration Statement, and the other risk factors discussed from time to time by our company in reports filed or furnished to the SEC.
Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this prospectus.
Unless otherwise indicated, all references to “we,” “us,” “our,” the “Company” and “Inspira” refer to Inspira Technologies Oxy B.H.N. Ltd. References to “NIS” are to New Israeli Shekels and references to “dollars” or “$” are to U.S. dollars. We report under International Financial Reporting Standards as issued by the International Accounting Standards Board. None of the financial statements were prepared in accordance with generally accepted accounting principles in the United States.
A. Operating Results
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and the related notes thereto for the six months ended June 30, 2021, included elsewhere in this Report on Form 6-K. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties
Overview
Since our inception in 2018, we have incurred operating losses. Our operating loss for the six-months ended June 30, 2020 and 2021 were $2.3 million and $2.6 million, respectively. As of June 30, 2021, we had an accumulated deficit of $20 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future, and our losses may fluctuate significantly from year to year. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:
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| ● | continue clinical development of our ART system; | |
| ● | file new applications seeking regulatory approval for the ART pursuant to FDA’s Section 510(K) regulatory pathway in the United States; | |
| ● | continue to invest in the preclinical research and development of any future product candidates; | |
| ● |
establish a commercial infrastructure to support the marketing, sale and distribution of the ART if it receives regulatory approval; | |
| ● | hire additional research and development and general and administrative personnel to support our operations; | |
| ● | maintain, expand and protect our intellectual property portfolio; and | |
| ● | continue to incur costs associated with operating as a public company. |
We do not have any product candidates approved for sale and have not generated any revenue from product sales.
On July 16, 2021, we closed our initial public offering, or IPO, whereby we sold 2,909,091 Ordinary Shares and 3,345,455 tradable warrants (inclusive of 436,364 tradable warrants pursuant to the exercise of an overallotment option granted to the underwriters). The aggregate net proceeds received by us from the IPO were $16 million, before underwriting discounts and other offering costs. Prior to our IPO, we financed our operations primarily through convertible debt, as well as grants from the Israel Innovation Authority, or the IIA.
Operating Expenses
Our current operating expenses consist of three components — research and development expenses, general and administrative expenses and marketing expenses.
Revenue
To date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least.
Research and Development Expenses, net
Our research and development expenses consist primarily of salaries and related personnel expenses, share-based compensation expenses, materials costs consultants and other third parties who support the developments of our product service fees and other related research and development expenses.
In October 2019, we received the approval of the IIA for its participation in certain development expenses carried out by the Company, within the framework of determined budgets and time periods. Through June 30, 2021, we received a total of $843,000 and no additional grants are expected to be received.
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The following table discloses the breakdown of research and development expenses:
| Six Months Ended June 30, | ||||||||
| U.S. dollars in thousands | 2021 | 2020 | ||||||
| Salary and related expenses | 584 | 524 | ||||||
| Materials and related expenses | 80 | 143 | ||||||
| Subcontractors | 147 | 52 | ||||||
| IIA participation | (51 | ) | (218 | ) | ||||
| Share-based compensation | 241 | 769 | ||||||
| Depreciation | 59 | 78 | ||||||
| Office maintenance | 44 | 108 | ||||||
| Total | 1,104 | 1,456 | ||||||
We expect that our research and development expenses will materially increase as we continue to develop our products and recruit additional research and development employees.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related expenses, share based compensation, professional service fees for accounting and booking, legal fees, facilities, travel expenses and other general and administrative expenses.
The following table discloses the breakdown of general and administrative expenses:
| Unaudited | Six Months Ended June 30, | |||||||
| U.S. dollars in thousands | 2021 | 2020 | ||||||
| Professional fees | 715 | 200 | ||||||
| Salary and related expenses | 186 | 60 | ||||||
| Rent and office maintenance | 25 | 37 | ||||||
| Share-based compensation | 222 | 532 | ||||||
| Travel abroad | 14 | 10 | ||||||
| Depreciation | 34 | 1 | ||||||
| Others | 14 | - | ||||||
| Total | 1,210 | 840 | ||||||
Comparison of the Six Months Ended June, 2021 and 2020
Results of Operations
| Six Months Ended June 30, | ||||||||
| U.S. dollars in thousands | 2021 | 2020 | ||||||
| Research and development expenses | 1,104 | 1,456 | ||||||
| Marketing expenses | 244 | - | ||||||
| General and administrative expenses | 1,210 | 840 | ||||||
| Operating loss | 2,558 | 2,296 | ||||||
| Financial expenses | 5,732 | 2,052 | ||||||
| Net loss | 8,290 | 4,348 | ||||||
| Loss attributable to holders of Ordinary Shares | 8,290 | 4,348 | ||||||
Research and Development Expenses
Our research and development expenses for the six months ended June 30, 2021, amounted to $1,104,000 representing a decrease of $352,000, or 24%, compared to $1,456,000 for the six months ended June 30, 2020. The decrease is attribute to a decrease in share-based compensation expenses, and partially offset by the IIA payment of certain development expenses.
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Marketing expenses
Marketing expenses for the six months ended June 30, 2021 were $244,000, representing an increase of $244,000, compared to no such expenses for the six months ended June 30, 2020. The reason for the increase is that the Company is now focused on marketing, brand awareness and exploring go-to-market capabilities.
General and administrative expenses
Our general and administrative expenses totaled $1,210,000 for the six months ended June 30, 2021, an increase of $370,000 or 44%, compared to $840,000 for the six months ended June 30, 2020. The increase is attributed to an increase of $500,000 in corporate expenses, legal and professional fees in preparation for the IPO, as well as capital raising fees for the convertible loan agreements and simple agreements for future equity, an increase of $120,000 in salary and related expenses offset by a decrease of $310,000 in share-based compensation expenses.
Operating loss
As a result of the foregoing, our operating loss for the six months ended June 30, 2020 was $2,558,000 compared to an operating loss of $2,296,000 for the six months ended June 30, 2021, an increase of $262,000, or 11%.
Financial expenses
Financial expenses consist of revaluation of debt instruments presented at fair value and bank fees.
We recognized financial expenses for the six months ended June 30, 2021 of $5,732,000 representing an increase of $3,680,000 compared to financial expenses of $2,052,000 for the six months ended June 30, 2020. The increase was primarily due to a change in the fair value of debt instruments.
Total comprehensive loss
As a result of the foregoing, our total comprehensive loss for the six months ended June 30, 2021 was $8,323,000, compared to $4,363,000 for the six months ended June 30, 2020, an increase of $3,960,000, or 90%.
Impact of COVID-19
The global spread of COVID-19 led many countries, including Israel, to impose stringent limitations on movement, gatherings, transit of passengers and goods and to close the borders between countries. The responses of governments have notably impacted many economies as well as capital markets worldwide.
Our company was able to maintain almost ordinary levels of operations during the period including the performance of its planned studies. We were affected by service providers lack of availability and extended times of delivery from suppliers abroad. We also experienced several weeks of delay in receiving components of the ART during the first half of 2020.
Future possible impact of COVID-19 will depend on future developments with the pandemic which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions by governments around the world to contain COVID-19 or treat its impact, among others.
Critical Accounting Policies and Estimates
The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. A comprehensive discussion of our critical accounting policies is included in “Critical Accounting Policies and Estimates” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our Registration Statement, as well as our unaudited condensed financial statements and the related notes thereto for the six months ended June 30, 2021, included elsewhere in this Report Form 6-K.
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JOBS Act Transition Period
We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, and intend to, take advantage of certain exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenues of at least $1.07 billion or (c) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
B. Liquidity and Capital Resources
Overview
Since our inception through June 30, 2021, we have funded our operations principally from the convertible securities and loans and from government grants.
As of June 30, 2021, we had $4,355,000 in cash and cash equivalents.
The table below presents our cash flows for the six months ended June 30, 2021:
| Six Months Ended June 30, | ||||||||
| U.S. dollars in thousands | 2021 | 2020 | ||||||
| Net cash used in operating activities | (2,330 | ) | (836 | ) | ||||
| Net cash used in investing activities | (898 | ) | (51 | ) | ||||
| Net cash provided by financing activities | 7,114 | 966 | ||||||
| Net increase in cash and cash equivalents | 3,886 | 79 | ||||||
Operating Activities
Net cash used in operating activities of $2,330,000 during the six months ended June 30, 2021 and net cash used in operating activities of $836,000 during the six months ended June 30, 2020 was primarily used for payment of salaries and related personnel expenses, materials expenses, subcontractors, travel and office maintenance.
Investing Activities
Net cash used in investing activities of $898,000 during the six months ended June 30, 2021, consisted mainly of a short time restricted deposit in amount of $857,000 and $41, used for purchasing property and equipment. Net cash used in investing activities of $51,000 during the six months ended June 30, 2020, primarily reflected property purchases and operational deposits.
Financing Activities
Net cash provided by financing activities of $7,114,000 during the six months ended June 30, 2021, consisted mainly of $7,165,000 of net proceeds from convertible loan and simple agreements for future equity, and from the IIA’s grant of $55,000.
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Net cash provided by financing activities of $966,000 during the six months ended June 30, 2020, consisted mainly of $857,000 of net proceeds from the convertible note and from the IIA’s grant of $197,000.
Current Outlook
We have financed our operations to date primarily through convertible notes and loans and from grants from the IIA. We have incurred losses and generated negative cash flows from operations since inception in 2018. Since inception, we have not generated any revenue and we do not expect to generate significant revenues in the near future.
As of June 30, 2021, our cash and cash equivalents were $4,355,000. On July 16, 2021, we closed our initial public offering. The aggregate net proceeds received by us from the IPO were $16 million, before underwriting discounts and other offering costs.
We expect that our existing cash and cash equivalents as of the June 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.
Our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including:
| ● | the progress and costs of our research and development activities; | |
| ● | the costs of manufacturing our products; | |
| ● | the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; | |
| ● | the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and | |
| ● | the magnitude of our general and administrative expenses. |
Until we can generate significant recurring revenues and profit, we expect to satisfy our future cash needs through equity or debt financings. We cannot be certain that additional funding will be available to us when needed, on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our product candidates. This may raise substantial doubts about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency Exchange Risk
We operate primarily in Israel, and approximately 80% of our expenses are denominated in NIS. We are therefore exposed to market risk, which represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We are subject to fluctuations in foreign currency rates in connection with these arrangements.
We currently partially hedge our foreign currency exchange rate risk to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.
Interest Rate Risk
We do not anticipate undertaking any significant long-term borrowings. At present, our investments consist primarily of cash and cash equivalents, and short-term deposits. The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments may be exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments, if any.
Impact of Inflation and Currency Fluctuations
Inflation generally affects us by increasing our NIS-denominated expenses, including salaries and benefits, as well as facility rental costs and payment to local suppliers. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the six months ended June 30, 2021.
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