Business context and reporting period
Integrity Applications, Inc. (the registrant in this filing; its product is GlucoTrack) filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2021. The company develops non-invasive glucose-monitoring devices for people with diabetes and prediabetes. It reported no revenue for either the three- or nine-month period.
Key financial metrics
Amounts below are in thousands of U.S. dollars, except per-share data.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | 0 | 0 | 0 | 0 |
| Operating expenses | 767 | 887 | 2,536 | 2,254 |
| Operating loss | (767) | (887) | (2,536) | (2,254) |
| Net loss | (804) | (509) | (2,561) | (1,817) |
| Net loss per share, basic and diluted | (0.05) | (0.03) | (0.17) | (0.12) |
| Cash used in operating activities | Not provided by quarter | Not provided by quarter | (2,796) | (2,657) |
At September 30, 2021, cash and cash equivalents were $7.0 million; total assets were $7.6 million, total liabilities $1.1 million, and stockholders’ equity $6.5 million. Liabilities included $201,000 in long-term loans from stockholders and $65,000 in operating lease liabilities. Cash, cash equivalents and restricted cash totaled $7.078 million. The filing reports no gross margin, given the absence of revenue.
Material changes versus the prior comparable period
- Nine-month net loss increased to $2.561 million from $1.817 million. General and administrative expense rose to $1.323 million from $712,000, while R&D fell to $1.077 million from $1.268 million and selling and marketing fell to $136,000 from $274,000.
- Q3 net loss increased to $804,000 from $509,000 despite lower total operating expenses. The company attributed the comparison primarily to $338,000 of one-time supplier-related income recognized in the 2020 period.
- Operating cash use increased to $2.796 million from $2.657 million for the first nine months. Cash and cash equivalents declined from $9.823 million at year-end 2020 to $7.0 million at September 30, 2021.
- The company reported no financing cash inflow in the first nine months of 2021, compared with $13.009 million in the 2020 period, which reflected the 2020 private placement.
Outlook, commentary and risks
- Management said available cash was expected to fund operations for more than one year from the report date, but additional capital would be needed beyond that period or sooner if spending or plans change. An effective shelf registration permits registration of up to $100 million of equity and debt securities; it does not itself provide funding.
- The company said it was accelerating development of GlucoTrack 2.0, envisioned as a wireless, rechargeable earclip paired with a smartphone. It was also planning U.S. clinical trials and field testing, identifying clinical sites and interviewing contract research organizations. No quantified financial guidance was provided.
- The company had been pursuing reimbursement and distribution groundwork in the Netherlands, but said it would prioritize GlucoTrack 2.0 over introducing GlucoTrack 1.0 there. Commercial timing and reimbursement remain uncertain.
- Key risks include continued losses and dependence on external financing; product development, clinical and regulatory requirements, including FDA work; market acceptance and reimbursement; and potential COVID-19 impacts. The company reported an accumulated deficit of $95.960 million and a history of operating losses and negative operating cash flow.
- A 1-for-13 reverse stock split took effect August 13, 2021, and share and per-share figures were retrospectively adjusted. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the company’s current legal name, listing status, share count and capital structure; this 2021 filing is under Integrity Applications, Inc.
- Assess actual cash burn and financing needs against management’s stated runway, and whether the shelf registration has been used.
- Track GlucoTrack 2.0 development, U.S. trial plans, regulatory milestones, and timing and cost to market.
- Verify the progress and terms of European distribution and reimbursement plans, particularly given the shift in focus from GlucoTrack 1.0.
- Review an apparent MD&A inconsistency: Q3 2021 general and administrative expense was $207,000 versus $318,000 in Q3 2020, although the narrative attributes an increase to hiring.