Glucotrack, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. The interim financial statements are unaudited. Amounts below are in U.S. dollars; financial statement amounts are generally in thousands unless noted.
Business context and reporting period
Glucotrack is a development-stage medical device company with no significant current product revenue. It is developing a non-invasive glucose monitor for people with Type 2 diabetes and prediabetes, and an implantable continuous glucose monitor (CGM) for people with Type 1 and insulin-dependent Type 2 diabetes. The earlier GlucoTrack 1.0 product was discontinued.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | No significant revenue reported | No significant revenue reported | No significant revenue reported | No significant revenue reported |
| Research and development expense | $627 | $469 | $1,269 | $929 |
| General and administrative expense | $552 | $654 | $1,194 | $1,287 |
| Total operating expenses | $1,179 | $1,123 | $2,463 | $2,216 |
| Net loss | $1,176 | $1,127 | $2,462 | $2,220 |
| Basic and diluted loss per share, statements | $(0.09) | $(0.07) | $(0.18) | $(0.14) |
As the company reported no significant revenue, revenue growth and profit margins are not meaningful. Six-month R&D expense increased, which management attributed to accrued professional fees; G&A expense declined, also attributed to professional fees. Operating cash use was $2.267 million in the cash flow statement, compared with $2.181 million in the prior-year period. The MD&A gives 2023 operating cash use as $2.269 million, a discrepancy the filing text does not reconcile. Investing cash use was nil; financing provided $8.730 million of net proceeds from the April public offering.
At June 30, cash and cash equivalents were $8.774 million, with $10,000 of restricted cash. Current assets were $8.945 million and current liabilities $1.050 million. Total liabilities were $1.239 million, including $189,000 of stockholder loans; the filing does not present conventional bank debt. Accumulated deficit was $105.218 million. Management stated the offering proceeds were sufficient to fund the business plan for the 12 months after the reporting date and concluded substantial doubt about going concern was not raised, while noting ongoing operating losses, negative operating cash flow, and reliance on external financing.
Material changes, unusual items, and outlook
- The April 2023 underwritten offering raised $10.0 million gross and $8.730 million net after expenses. It included 5,376,472 common shares and 1,976,470 pre-funded warrants, exercisable at $0.001 per share. Common shares outstanding rose from 15.50 million at year-end 2022 to 20.89 million at June 30, 2023.
- The offering triggered down-round provisions on certain previously issued warrants, reducing exercise prices and resulting in an $855,000 deemed dividend. This noncash item increased loss attributable to common stockholders: the notes report loss per share of $(0.10) for Q2 and $(0.19) for the six-month period, versus $(0.09) and $(0.18) in the statements. Investors should distinguish this deemed-dividend-adjusted measure from reported net loss per share.
- Management expects R&D spending to increase in 2023 and beyond to support staffing and product development, subject to available resources and commercial needs. A first-in-human study of GlucoTrack 2.0 is planned after the company achieves its required measurement-accuracy metric; commercial-device development was expected to begin in early 2024. No revenue or earnings guidance is provided.
- The company reported promising initial GlucoTrack 2.0 testing but said work remains to achieve consistent accuracy. For the implantable CGM, the company reported a successful feasibility study indicating a minimum two-year implant life was highly probable; in a July 2023 subsequent update, it said long-term animal studies were expected to begin later in 2023. These are development-stage claims, not regulatory approval or commercial results.
- Nasdaq notified the company in May 2023 that its stock did not meet the $1 minimum bid-price requirement. It had 180 days to regain compliance, including a requirement for a closing bid of at least $1 for ten consecutive business days; otherwise it could qualify for additional time or face delisting.
- Disclosure controls and procedures were deemed ineffective as of June 30, 2023, due to material weaknesses involving insufficient accounting personnel, segregation of duties, and company-wide and IT controls. Management planned remediation, including hiring, during 2023, but cautioned that these efforts might not fully resolve the weaknesses.
Most important facts to verify
- Whether cash use, spending, and any subsequent financing leave adequate runway beyond management’s stated 12-month assessment.
- Progress toward GlucoTrack 2.0 accuracy targets, first-in-human study commencement, and the stated commercial-development timetable.
- Progress and evidence supporting the implantable CGM’s longevity claims and planned animal studies.
- Nasdaq bid-price compliance status and any potential delisting or listing-rule consequences.
- Remediation of the disclosed control weaknesses, and the effects of pre-funded warrants and other potential share issuance on dilution.
- The filing’s differing cash-flow and loss-per-share presentations, including the deemed dividend, when comparing reported results.