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COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION
 12 Months Ended
Dec. 31, 2021
Equity [Abstract]  
COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION

NOTE 9 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION

 

  A. 1. Description of the rights attached to the Common Stock
       
      Each share of Common Stock entitles the holder to one vote, either in person or by proxy, on each matter submitted to the approval of the Company’s stockholders. The holders of Common Stock are not permitted to vote their shares cumulatively.
       
    2. Description of February 14, 2020 Issuance of common stock
       
     

On February 14, 2020, the Company entered into a Securities Purchase Agreement and Registration Rights Agreement with an accredited investor, pursuant to which the accredited investor purchased 2,884,615 shares of the Company’s common stock, par value $0.001 per share, for an aggregate gross purchase price of $15 million, less cash expenses of approximately $2 million

       
      Placement Agent Compensation
       
      Pursuant to a placement agent agreement (the “Placement Agent Agreement”) with the placement agent for the Offering (the “Placement Agent”), at the closing of the above mentioned sale of the common stock the Company paid the Placement Agent, as a commission, a cash amount equal to 7% of the aggregate sales price of the Units, plus 3% of the aggregate sales price as a management fee plus a non-accountable expense allowance equal to 3% of the aggregate sales price of the Units. In addition, pursuant to the placement agent agreement, the company is required to issue to the Placement Agent warrants to purchase up to such number of shares of Common Stock equal to 10% of the aggregate Shares sold in the Offering plus warrants equal to 10% of the total number of the Warrants issued to the Purchasers in the Offering (collectively, the “Placement Agent Warrants”). The terms of the Placement Agent Warrants will be substantially similar to the Warrants except that the Placement Agent Warrants will also be exercisable on a cashless basis and will include full ratchet anti-dilution protection.

 

 

GLUCOTRACK INC. (FORMERLY: INTEGRITY APPLICATIONS, INC.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

 

NOTE 9 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

 

  B. Stock-based compensation
     
    1. Grants to non-employees

 

  a. In connection with the 2017 Offering, the Company has issued to the Placement Agent (a) 5-year warrants to purchase up to 1,062,717 shares of Common Stock at an exercise price of $3.354 per share, (b) 5-year warrants to purchase up to 108,305 shares of Common Stock at an exercise price of $23.40 per share.(c) 5-year warrants to purchase up to 8,331 shares of Common Stock at an exercise price of $46.80 per share, and (d) 5-year warrants to purchase up to 8,331 shares of Common Stock at an exercise price of $70.20 per share. The terms of the Placement Agent warrants are substantially similar to the terms of the Series D warrants except that the Placement Agent warrants may also be exercisable on a cashless basis at all times.
     
   

In connection with February 2020 Offering, the Company has issued to the Placement Agent 5-year warrants to purchase up to 288,462 shares of Common Stock at an exercise price of $5.2 per share.

 

During the year ending December 31, 2020, $756 thousand, respectively, representing the fair value of warrants issued as consideration for placement agent services to AGI. This amount was accounted for as Warrants with down-round protection. Upon issuance, the fair value was recognized as an increase in additional paid in capital

     
    As of December 31, 2020, the key inputs used in the fair value calculations of the warrant that were affected by the down-round protection were as follows:

 

Fair value calculations – Warrant  31-Dec-20 
Dividend yield (%)   - 
Expected volatility (%)   56.32 
Risk free interest rate (%)   2.5 
Expected term of options (years)   5 
Exercise price (US dollars)   5.2 
Share price (US dollars)   5.2 
Fair value (US dollars)   2.6 

 

    2. Grants to employees
       
      In August 2007, Integrity Israel’s Board of Directors (“Integrity Israel’s Board”) approved a stock option plan (“Integrity Israel’s plan”) for the grant, without consideration of options exercisable into ordinary shares of NIS 0.01 par value of Integrity Israel to employees, officers and directors of Integrity Israel. The exercise price and vesting period for each grantee of options was determined by Integrity Israel’s Board and specified in such grantee’s option agreement. The options vested over a period of 1-12 quarters based on each grantee’s option agreements. Any option not exercised within 10 years after the date of grant thereof will expire.

 

 

GLUCOTRACK INC. (FORMERLY: INTEGRITY APPLICATIONS, INC.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

 

NOTE 9 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

 

  B. Stock-based compensation (cont.)
       
    2. Grants to employees (cont.)
       
      In July 2010, following the merger with Integrity Israel, the Company adopted the 2010 Share Incentive Plan (the “2010 Share Incentive Plan”), pursuant to which the Company’s Board of Directors is authorized to grant options exercisable into Common Stock of the Company.
       
      The purpose of the 2010 Share Incentive Plan is to offer an incentive to employees, directors, officers, consultants, advisors, suppliers and any other person or entity whose services are considered valuable to the Company, as well as to replace the Integrity Israel Plan and to replace all options granted in the past by Integrity Israel.
       
     

Effective June, 2020, Erez Ben-Zvi has joined the Company as its Vice President of Product.

 

On February 8, 2021, the Company announced that it has promoted Erez Ben-Zvi to General Manager in addition to his current role as Vice President of Product, effective immediately

 

The Company granted Mr. Ben-Zvi annual award of NIS 210 thousand worth (approximately $ 65 thousand) of restricted stock units (the “RSU”) effective as of the employee Start Date and on each one-year anniversary following the employee Start Date subject to the approval of the board of directors (the “additional RSU”). The RSU and each of the Additional RSU (if approved by the board of directors), as applicable, shall be based on the stock price at actual the date of grant (and not lower than US$ 5.20 per share). 1/12 of the RSUs shall vest and become nonforfeitable three months following the Start Date, and an additional 1/12 of the RSUs shall vest and become nonforfeitable at the end of every 3-months period thereafter, provided that the employee continues to be employed by the Company at the applicable date of vesting. The vesting schedule shall be also applied to each of the Additional RSUs granted, mutatis mutandis, such that the vesting period of each of the respective Additional RSU shall commence from its actual date of grant

       
     

Effective November, 2020, Mr. Shalom Shushan has joined the Company as its Chief Technology Officer, Mr. Shushan will lead all technology and research and development activities for Integrity and will serve on the Company’s executive leadership team.

 

The Company granted Mr. Shushan annual award of NIS 90 thousand worth (approximately $28 thousand) of restricted stock units (the “RSU”) effective as of the employee Start Date. Furthermore, on each one-year anniversary following the employee Start Date subject to the approval of the board of directors, Company shall grant the Employee with NIS 60 thousand worth of restricted stock units (the “Additional RSU’’). Both the RSU and each of the Additional RSU (if approved by the board of directors), as applicable, shall be based on the stock price at actual the date of grant (and not lower than US$ 5.20 per share). 1/12 of the RSUs shall vest and become nonforfeitable three months following the Start Date, and an additional 1/12 of the RSUs shall vest and become nonforfeitable at the end of every 3-months period thereafter, provided that the Employee continues to be employed by the Company at the applicable date of vesting. The vesting schedule shall be also applied to each of the Additional RSUs granted to the Employee, mutatis mutandis, such that the vesting period of each of the respective Additional RSU shall commence from its actual date of grant

       
     

On October 19, 2021, Paul V. Goode was appointed as President and Chief Operating Officer of the company, Inc, effective November 1, 2021. He has served as a member of Integrity’s Board of Directors since December 17, 2020. Concurrent with his appointment, Mr. Goode has stepped down from the Board.

 

Effective November 20201, the Company granted Mr. Paul V. Goode options to purchase up to 1.5% of the fully diluted common stock, par value $0.001 per share (approximately 330 thousand options), of the Company (“Common Stock”) as of the Effective Date, with a per share exercise price equal to the greater of (A) $5.20 per share or (B) the closing price of a share of Common Stock on the Effective Date, as reported by Bloomberg L.P., which shall vest in equal monthly installments over a three year period following the Effective Date.

       
     

On December 3, 2021, James p. thrower was appointed as Vice President Engineering of the company.

 

Effective December 20201, the Company granted Mr. James p. Thrower options to purchase up to 1.15% of the fully diluted common stock, par value $0.001 per share (approximately 250 thousand options), of the Company (“Common Stock”) as of the Effective Date, with a per share exercise price equal to the greater of (A) $5.20 per share or (B) the closing price of a share of Common Stock on the Effective Date, as reported by Bloomberg L.P., which shall vest in equal monthly installments over a three year period following the Effective Date.

 

Grants to Employees  Number   Weighted average exercise price (US$) 
Balance outstanding as of December 31,2019   156,007   $63.44 
Balance exercisable of December 31,2019   132,630   $60.19 
Granted during 2020   -   $- 
Forfeited during 2020   (25,770)  $58.63 
Balance outstanding as of December 31,2020   130,237   $64.35 
Balance exercisable of December 31,2020   128,296    64.48 
Granted during 2021   577,064    5.20 
Forfeited during 2021   (98,177)   64.64 
Balance outstanding as of December 31,2021   609,124    8.10 
Balance exercisable of December 31,2021   39,223    46.41 

 

The following tables summarize information about options outstanding at December 31, 2021:

 

Exercise

price (US$)

   Outstanding at December 31, 2021   Exercisable at December 31, 2021   Weighted average remaining contractual life (years) 
              
 5.2    579,004    9,103    2.75 
 58.5    26,274    26,274    5.18 
 100.75    3,846    3,846    5.26 
      609,124    39,223      

 

 

GLUCOTRACK INC. (FORMERLY: INTEGRITY APPLICATIONS, INC.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

 

NOTE 9 – COMMON STOCK AND WARRANTS WITH-DOWN ROUND PROTECTION (cont.)

 

  C. Stock-based compensation (cont.)
       
    2. Grants to employees (cont.)
       
      The fair value of options granted to employees during the years ended on December 31, 2021 was estimated at the dates of grant using the Black-Scholes option model. The following are the data and assumptions used:

 

Fair value calculations - Warrant   December 31, 2021  
Dividend yield (%)     -  
Expected volatility (%)     49.21  
Risk free interest rate (%)     2.5  
Expected term of options (years)     3  
Exercise price (US dollars)     5.2  
Share price (US dollars)     3.1-4.65  
Fair value (US dollars)     0.6-1.48