Business context and reporting period
The supplied filing is Integrity Applications, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2020, filed November 12, 2020. The request identifies Glucotrack, Inc.; the filing itself names Integrity Applications, Inc. Investors should verify the issuer and filing match.
The company develops and commercializes GlucoTrack, a non-invasive glucose-monitoring device. It reported minimal product revenue and continued operating losses.
Key financial metrics
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $4,175 | $2,271 | $140,255 |
| Operating expenses | $887,327 | $984,648 | $2,256,273 | $3,040,087 |
| Operating loss | $887,327 | $980,473 | $2,254,002 | $2,899,832 |
| Net loss | $509,015 | $996,777 | $1,816,957 | $2,917,287 |
| Operating cash used | Not presented separately | Not presented separately | $2,656,834 | $3,102,508 |
At September 30, 2020, cash and cash equivalents were $10.71 million, restricted cash was $57,653, and total current assets were $11.11 million. Current liabilities were $1.32 million; total liabilities were $1.53 million. The balance sheet lists $190,894 of long-term stockholder loans and $153,200 of operating lease liabilities. No conventional profitability margin is meaningful given the negligible revenue.
Changes versus prior comparable periods
- Nine-month revenue fell to $2,271 from $140,255; Q3 revenue was zero versus $4,175.
- Nine-month net loss narrowed to $1.82 million from $2.92 million. Lower selling and marketing and general and administrative costs more than offset increased R&D spending.
- Operating cash use improved to $2.66 million from $3.10 million for the nine-month period.
- Cash rose substantially from $418,621 at December 31, 2019, principally following a February 2020 equity placement. The company raised $15 million gross and received approximately $13.01 million net.
- Common shares outstanding increased from 161.86 million at year-end 2019 to 200.67 million at September 30, 2020. The placement involved 37.5 million shares; a placement agent also received a warrant for 3.75 million shares.
Outlook, commentary, risks and unusual items
- Management stated that cash and cash equivalents were expected to fund operations for more than one year from the report date. Additional capital would be needed to fund anticipated needs beyond that period, or sooner if spending or plans change.
- The company described a January 2020 CE Mark approval allowing user-performed calibration and said it was preparing for commercialization in selected markets. It had an exclusive Netherlands distribution agreement and was pursuing reimbursement discussions with insurers. No revenue or sales-volume guidance was provided.
- Management expected R&D and selling and marketing expenses to increase as product development, commercialization and potential FDA clinical-trial work proceed, subject to available resources and business needs.
- A $338,067 gain from settlement of a service-provider liability was recorded as other income and reduced operating cash flow adjustments. Nine-month financing income was $98,978, including interest income.
- The filing identifies COVID-19-related uncertainty, including potential effects on product demand, operations, economies and recovery. The company also depends on external financing and has an accumulated deficit of $92.52 million.
- Future product sales are subject to royalties to the Israeli Office of the Chief Scientist; the contingent liability was approximately $34,000, excluding interest. Stockholder loans are generally repayable only after the company reports an annual accounting profit and subject to working-capital limitations.
- The filing reports no off-balance-sheet arrangements and says disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Confirm that this Integrity Applications, Inc. filing is the intended filing for the Glucotrack, Inc. request.
- Reconcile the calibration interval: the recent-events note describes calibration once every nine months, while the MD&A says once every six months.
- Assess whether the company can achieve meaningful sales and reimbursement, given near-zero reported revenue and its commercialization plans.
- Review cash runway assumptions, future financing needs, equity dilution and outstanding options and warrants; the filing says 81.3 million weighted-average potential shares were excluded from nine-month diluted loss per share as anti-dilutive.
- Check the product’s regulatory, clinical and commercial progress, including any FDA pathway, and the potential business effects of COVID-19.