Glucotrack, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial statements are unaudited; amounts below are in U.S. dollars unless noted.
Business context
Glucotrack is a development-stage medical-device company focused on an implantable continuous glucose monitor (CGM) for people with Type 1 diabetes and insulin-dependent Type 2 diabetes. The company discontinued development and commercialization of its earlier non-invasive spot-measurement product and is concentrating resources on the implantable CGM.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $1.693 million | $0.434 million | $2.962 million | $1.363 million |
| General and administrative expense | $0.531 million | $0.495 million | $1.725 million | $1.782 million |
| Total operating expenses / operating loss | $2.224 million | $0.929 million | $4.687 million | $3.145 million |
| Net loss | $2.223 million | $0.928 million | $4.685 million | $3.148 million |
| Basic and diluted loss per share | $0.10 | $0.06 | $0.28 | $0.20 |
As there was no reported revenue, gross margin and operating margin are not applicable. Q3 research and development spending increased substantially year over year as the company advanced the implantable CGM and incurred staffing, professional-service, manufacturing and animal-study costs. Nine-month R&D expense more than doubled, while G&A expense declined modestly.
- Cash and liquidity: Cash and cash equivalents were $6.888 million at September 30, 2023, versus $2.312 million at December 31, 2022. Including restricted cash, period-end cash was $6.897 million.
- Cash flow: Nine-month operating cash use was $4.147 million, compared with $2.789 million in 2022. Investing cash use was nil; financing provided $8.730 million, primarily from the April public offering.
- Debt and liabilities: Total liabilities were $1.638 million, including $1.454 million of current liabilities and $0.184 million of stockholder loans. The filing reports no other debt balance.
- Equity and financing: Stockholders’ equity was $5.557 million. In April, the company received approximately $10 million gross and $8.730 million net from an offering of 5,376,472 shares and 1,976,470 pre-funded warrants. Shares outstanding at September 30 were 20,892,193.
Material changes, outlook and risks
- Net loss increased versus the prior-year periods, primarily due to higher R&D spending on the implantable CGM. Management expects R&D spending to increase as development, hiring and validation progress, subject to available resources. It expects continued losses and no positive operating cash flow for the foreseeable future.
- Management stated that period-end cash was expected to fund current operations and the animal-trial program for 12 months after September 30, 2023. The company remains dependent on external financing; it cautioned that additional capital may not be available on acceptable terms or at all, and development could be delayed, reduced or discontinued.
- The company reported a feasibility study indicating that at least two years of implant life was highly probable based on testing of the current sensor design. It reported an initial animal study with an initial prototype and planned a long-term animal trial and commercial-device development in late Q4 2023, with a regulatory submission targeted for late 2024 to support a first-in-human study. These are plans, not assured outcomes.
- Nasdaq notified the company on May 26, 2023 that it was below the $1 minimum-bid-price requirement. The stated 180-day compliance period ran through November 22, 2023; failure to regain compliance could lead to delisting.
- Disclosure controls and procedures were deemed ineffective due to material weaknesses, including insufficient accounting personnel, segregation of duties, and entity- and transaction-level controls, including IT general controls. Management planned remediation during fiscal 2024, but noted it might not fully resolve the weaknesses.
- The April offering triggered a down-round protection feature on certain earlier warrants, resulting in an $855,000 deemed dividend. This was recorded within equity but increased the nine-month loss attributable to common stockholders for loss-per-share purposes.
- The filing’s MD&A states Q3 net loss was approximately $2.42 million, while the financial statements report $2.223 million. The filing text does not explain this discrepancy; the financial-statement figure is used above.
Important facts for investors to verify
- Current cash runway, actual spending pace and financing needs beyond the stated 12-month operating and animal-trial period.
- Progress, results and timing of long-term animal studies, commercial-device development, and regulatory steps toward a first-in-human study.
- Nasdaq bid-price compliance status and any consequences for the listing.
- Remediation of the disclosed internal-control material weaknesses.
- The Q3 net-loss discrepancy between MD&A and the financial statements, and the effects of outstanding pre-funded warrants and other potential share issuance on dilution.