Glucotrack, Inc. — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021; this is an annual filing, not a quarterly report. Financial statement amounts below are in U.S. dollars, thousands, unless stated otherwise. The company filed as Integrity Applications, Inc.; it changed its name to Glucotrack, Inc. and ticker to GCTK in March 2022.
Business context
Glucotrack is a pre-commercial medical-device company developing non-invasive glucose monitors. Its GlucoTrack 1.0 uses an earlobe clip and ultrasound, electromagnetic and thermal measurements; it has CE Mark authorization for specified uses in Europe, but is not cleared or approved for U.S. sale. GlucoTrack 2.0, a wireless version intended to connect to a smartphone, was under development. The company reported no significant operating revenue and one operating segment.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | No significant operating revenue reported | No significant operating revenue reported |
| Research and development expense | $1,810 | $1,532 |
| Selling and marketing expense | $139 | $415 |
| General and administrative expense | $2,091 | $1,185 |
| Operating loss | $4,040 | $3,132 |
| Net loss | $4,067 | $2,696 |
| Net cash used in operating activities | $3,769 | $3,501 |
Gross profit and operating margins are not meaningful because the company had no significant revenue. Loss per share was $0.26 in 2021 versus $0.19 in 2020. Accumulated deficit reached $97,466 at year-end 2021.
Cash and cash equivalents were $6,062 at December 31, 2021, down from $9,823 a year earlier; restricted cash was an additional $51. Current assets were $6,105 and current liabilities $883. Total liabilities were $1,110, including $210 of stockholder loans and $40 of operating lease liabilities. The filing describes the stockholder loans as long-term; repayment is tied to profitability and sales, subject to a working-capital safeguard. No conventional bank debt balance is identified in the supplied filing text.
Operating cash use was $3,769; investing cash use was $1; and financing cash flow was zero in 2021. In 2020, the company raised $13,009 net from an equity offering. Its effective shelf registration allowed up to $100 million of securities to be registered, but no proceeds had been raised under it as of the filing.
Changes versus 2020
- Net loss increased by $1,371, while operating expenses rose by $908. G&A increased $906, principally due to additional personnel and professional fees; R&D increased $278; and selling and marketing expense decreased $276 as business-development spending was reduced pending GlucoTrack 2.0.
- Fourth-quarter 2021 R&D expense included a $321 inventory write-down associated with development of the next-generation device; year-end inventory was written down to zero.
- Operating cash use increased by $268, and cash declined by $3,761. The prior-year comparison included $13,009 of net equity financing, while 2021 had no financing proceeds.
- Management reported an accumulated deficit of $97.5 million and continuing operating losses and negative operating cash flow.
Outlook, commentary and risks
Management expected R&D spending to increase in 2022 and beyond for hiring, product development, GlucoTrack 2.0 and regulatory work, while noting spending could be adjusted to available resources. The company provided no numerical revenue or earnings guidance. Management said year-end cash was expected to fund operations for at least 12 months from issuance of the financial statements; the auditor highlighted recurring losses and negative operating cash flow in an emphasis-of-matter paragraph.
Management’s stated priorities included advancing GlucoTrack 2.0, developing companion digital-health applications, planning U.S. clinical trials and building a U.S. commercialization strategy. The company had been conducting a Netherlands pilot and reimbursement discussions, but shifted its near-term commercial focus toward GlucoTrack 2.0. Commercial prospects depend on product performance, regulatory clearance, manufacturing and distribution partners, market acceptance and reimbursement.
- Regulatory and clinical: U.S. pathway remained uncertain; FDA had not determined that PMA would be required, and the company anticipated clinical trials. Positive earlier studies do not assure later trial success or clearance.
- Funding and execution: The company depends on external financing and had not raised funds under its shelf registration. Product development and commercialization require substantial spending.
- Commercial and operational: Reimbursement, third-party manufacturing, distributors, competition and the ability to improve accuracy and reduce costs are material uncertainties.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end 2021, citing insufficient accounting personnel, segregation of duties and company-wide controls, including IT general controls. Remediation was planned for 2022; effectiveness had not been established.
- Other exposures: The filing cites COVID-19 uncertainty, foreign-exchange exposure, Israeli Innovation Authority restrictions on certain technology transfers and manufacturing, and a contingent royalty obligation on future sales. No material litigation or off-balance-sheet arrangements were reported.
The independent auditor issued an unqualified opinion on the financial statements and reported no critical audit matters. The auditor did not provide an opinion on internal-control effectiveness.
Investor verification checklist
- Confirm current cash runway, subsequent financing, cash burn and the assumptions behind management’s at-least-12-month liquidity assessment.
- Track GlucoTrack 2.0 development milestones, clinical-trial plans, FDA pathway and any regulatory or performance updates.
- Verify whether European partners, distribution plans and reimbursement discussions have advanced, and whether GlucoTrack 1.0 remains commercially available or is being superseded.
- Monitor remediation of the disclosed material weaknesses and effectiveness of financial-reporting controls in subsequent filings.
- Review potential dilution from outstanding options and warrants, the shelf registration, and any future capital raises; the filing reported 15.45 million common shares outstanding at December 31, 2021.
- Check the terms and status of stockholder loans, future-sales royalties to the Israeli Innovation Authority and any changes in contingent obligations.