Business context and reporting period
This is Integrity Applications, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2020. The company develops and commercializes GlucoTrack, a non-invasive glucose monitor; the filing’s registrant name differs from the metadata name Glucotrack, Inc.
Financial performance and position
| Metric | Q2 2020 | Six months 2020 | Comparable 2019 period |
|---|---|---|---|
| Revenue | $97 | $2,271 | $110,518 quarter; $136,080 six months |
| Operating expenses | $611,282 | $1,368,946 | $1,004,824 quarter; $2,055,439 six months |
| Operating loss | $611,185 | $1,366,675 | $894,306 quarter; $1,919,359 six months |
| Net loss | $574,173 | $1,307,942 | $898,857 quarter; $1,920,510 six months |
| Net cash used in operating activities | Not provided for quarter | $1,892,003 | $2,041,043 six months |
Revenue fell sharply year over year, attributed to fewer product orders. Six-month operating expenses and net loss declined, mainly due to lower personnel-related, selling and marketing, and general and administrative costs. The filing provides no meaningful gross-margin figure; revenue was minimal and cost of revenue is not separately reported.
At June 30, cash and cash equivalents were $11.51 million, with $56,911 of long-term restricted cash. Current assets were $11.92 million versus current liabilities of $1.57 million. Total liabilities were $1.79 million, including $188,255 in stockholder loans and $115,072 in operating lease liabilities; no conventional bank debt balance is clearly presented. Accumulated deficit was $92.01 million.
Material changes and financing
In February 2020, the company sold 37.5 million common shares for $15 million gross proceeds and received $13.01 million net proceeds after fees and expenses. The placement agent received $1.95 million in fees and warrants to purchase 3.75 million shares. Shares outstanding rose from 161.86 million at year-end 2019 to 200.53 million at June 30, 2020. Financing activities provided $13.01 million in the first half.
Management stated that cash was expected to fund operations for at least 12 months from the financial statement issuance date, but additional capital would be needed thereafter, or sooner if cash needs increased. Six-month operating cash use remained $1.89 million.
Outlook, risks and unusual items
- The company announced CE Mark approval for user-performed GlucoTrack calibration: approximately 30 minutes, three finger-stick reference measurements, and recalibration every six months. Management said the product was ready for commercial launch in selected market segments.
- Commercialization depends on distribution partners, product affordability, customer adoption, and health-insurance reimbursement. The company was working with its Netherlands distributor and insurers; reimbursement approval was described as important to sales volume.
- Management expected research and development and selling and marketing expenses to increase as it develops products, pursues commercialization, and considers FDA-related clinical trials. It gave no quantified financial guidance.
- The company was developing a companion mobile application, cloud platform, and GT-Link connectivity, and was planning a possible national-exchange uplisting, without assurance of timing or success.
- COVID-19 could affect product demand, operations, and economic recovery. The company also depends on external financing and has a substantial accumulated deficit.
- Future product sales are subject to contingent Israeli government royalties; the disclosed liability was approximately $34,000, excluding interest. No subsequent events or off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Whether cash runway remains consistent with management’s at-least-12-month assessment, given ongoing operating cash use and the need for future financing.
- Commercial sales, distributor execution, and actual insurer reimbursement progress following the calibration enhancement.
- The dilution and potential warrant overhang from the 2020 financing, including the placement-agent warrants.
- The recoverability of inventory: the filing reports a $1.46 million slow-moving inventory provision against $1.71 million of gross inventory.
- The regulatory and funding requirements for any FDA pathway and planned product development.