Business context and reporting period
Integrity Applications, Inc. filed this unaudited Form 10-Q for the quarter ended March 31, 2021. The company develops and seeks to commercialize GlucoTrack, a non-invasive glucose monitor for people with diabetes and prediabetes. The filing identifies the product and company as described, but does not state a trading symbol.
Financial results and position
Amounts below are in thousands of U.S. dollars, except per-share and share data.
| Metric | Q1 2021 | Q1 2020 / prior balance |
|---|---|---|
| Revenue | None | None stated for comparison |
| Research and development expense | 309 | 413 |
| Selling and marketing expense | 23 | 91 |
| General and administrative expense | 564 | 252 |
| Total operating expenses / operating loss | 896 | 756 |
| Net loss | 904 | 734 |
| Net cash used in operating activities | 933 | 989 |
| Cash and cash equivalents, March 31, 2021 | 8,887 | 9,823 at Dec. 31, 2020 |
| Total liabilities, March 31, 2021 | 1,479 | 1,624 at Dec. 31, 2020 |
| Stockholders’ equity, March 31, 2021 | 8,149 | 8,982 at Dec. 31, 2020 |
With no revenue reported, a revenue margin is not meaningful. Cash, cash equivalents and restricted cash totaled 8,953 at quarter-end. The company reported 192 of long-term loans from stockholders and 149 of total operating lease liabilities; it reported no other material debt details in the provided filing text.
Material changes versus the prior comparable period
- Net loss increased by 170, from 734 to 904. Operating expenses increased by 140, chiefly because general and administrative expense rose by 312; lower R&D and selling and marketing expenses partly offset that increase.
- Financing results shifted from 22 of income to 8 of expense.
- Operating cash use improved by 56 to 933, despite the higher net loss. There was no investing cash use or financing cash inflow in Q1 2021; Q1 2020 financing cash inflow was 13,009, largely from a February 2020 private placement.
- Cash and cash equivalents declined by 936 from year-end 2020. Accumulated deficit rose to 94,303.
Outlook, commentary, risks and unusual items
- Management said cash and cash equivalents were expected to fund operations for at least 12 months from issuance of the interim statements, based on its current cash burn, strategy and operating plan. It expects to need additional capital for liquidity needs beyond that period, or earlier if needs increase.
- Management expected R&D expense to increase in 2021 and beyond, including for additional personnel and next-generation product development, subject to available resources and commercial needs. No numerical revenue, earnings or cash-flow guidance was provided.
- The company reported no significant operating revenue and said commercialization depends on matters including distribution partners, affordability, reimbursement and market acceptance. It described ongoing development of companion applications and a cloud-based solution, and discussions with potential partners.
- Risks discussed include the COVID-19 pandemic and its effects on demand and operations, product development, clinical and regulatory processes, financing needs, and the broader risks in the company’s 2020 Form 10-K. The filing states that results for the quarter are not necessarily indicative of full-year results.
- The company reported no off-balance-sheet arrangements. It stated that disclosure controls and procedures were effective at the reasonable-assurance level and that no material changes to internal control over financial reporting occurred during the quarter.
Important facts for investors to verify
- The MD&A says net loss decreased, but the financial statements show it increased from 734 in Q1 2020 to 904 in Q1 2021. The filing text does not reconcile this inconsistency.
- Confirm the cash runway assumptions and timing and terms of any future capital raise, given continuing losses and operating cash outflows.
- Track progress on product commercialization, distribution, reimbursement, regulatory requirements and development plans, including the proposed digital platform.
- Review potential dilution: 84,260,774 options and warrants were excluded from diluted loss per share as anti-dilutive; 200,781,064 common shares were outstanding at March 31, 2021.