UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For
the quarterly period ended |
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from ________________ to ________________ |
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | ||
| Smaller
reporting company | |||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 9, 2024, shares of the Company’s common stock, par value $ per share, were outstanding.
GLUCOTRACK INC.
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies or prospects. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including statements regarding our future activities, events or developments, including such things as future revenues, product development, clinical trials, regulatory approval, market acceptance, responses from competitors, capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success, projected performance and trends, and other such matters, are forward-looking statements. The words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “plan,” “may,” “will,” “could,” “would,” “should” and other similar words and phrases or the negative of such terms, are intended to identify forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q are based on certain historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. These statements relate only to events as of the date on which the statements are made and we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All of the forward-looking statements made in this Quarterly Report on Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties that may cause actual results to differ materially. Risks and uncertainties, the occurrence of which could adversely affect our business, include the risks identified in our Annual Report on Form 10-K for year ended December 31, 2023, under the caption “Risk Factors.” We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report unless required by law.
| 3 |
GLUCOTRACK INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLUCOTRACK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of US dollars except share data)
June 30, 2024 | December 31, 2023 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Operating lease right-of-use asset, net (Note 3C) | ||||||||
| Property and equipment, net | ||||||||
| Restricted cash | ||||||||
| TOTAL ASSETS | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accounts payable | ||||||||
| Notes payable (Note 3F) | ||||||||
| Operating lease liability, current (Note 3F) | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Loans from stockholders | ||||||||
| Operating lease liability, non-current (Note 3F) | ||||||||
| Total liabilities | ||||||||
| Commitments and contingent liabilities (Note 4) | ||||||||
| Stockholders’ equity | ||||||||
| Common Stock of $ par value (“Common Stock”): | ||||||||
| shares authorized as of June 30, 2024 and December 31, 2023; and shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Receipts on account of shares | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
| 4 |
GLUCOTRACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands of US dollars except share data) (unaudited)
| Six-month period ended June 30, | Three-month period ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Research and development expenses | $ | $ | $ | $ | ||||||||||||
| Marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ||||||||||||||||
| Finance income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | ||||||||||||||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| $ | $ | |||||||||||||||
| Comprehensive loss for the period | $ | $ | ||||||||||||||
| $ | $ | |||||||||||||||
| Basic and diluted net loss per common stock | $ | $ | ||||||||||||||
| Weighted average number of common stock used in computing basic and diluted loss per common stock | $ | $ | ||||||||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
| 5 |
GLUCOTRACK INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands of US Dollars except share data) (unaudited)
| In thousands of US Dollars (except share data) | ||||||||||||||||||||||||||||
| Common Stock | Additional | Receipts
on account | Accumulated
Other | Total Stockholders’ | ||||||||||||||||||||||||
| Numbers
of Shares | Amount | Paid-in
Capital | of
shares | Comprehensive
Income | Accumulated
Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Deemed dividend resulted from trigger of down round protection feature of certain warrants granted | - | ( | ) | |||||||||||||||||||||||||
| Issuance of Common Stock and pre-funded warrants upon completion of public offering, net of offering expenses | ||||||||||||||||||||||||||||
| Issuance of shares as compensation to the board of directors | (*) - | ( | ) | |||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Balance at April 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Deemed dividend resulted from trigger of down round protection feature of certain warrants granted | - | ( | ) | |||||||||||||||||||||||||
| Issuance of Common Stock and pre-funded warrants upon completion of public offering, net of offering expenses | ||||||||||||||||||||||||||||
| Issuance of restricted shares as compensation towards directors | (*) - | ( | ) | |||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Issuance of restricted shares as compensation towards directors | (*) | ( | ) | |||||||||||||||||||||||||
| Restricted shares to be issued as compensation towards directors | - | |||||||||||||||||||||||||||
| Issuance of Common Stock upon private placement transaction (Note 3D) | (*) | |||||||||||||||||||||||||||
| Issuance of restricted shares as payment for a previous achievement of milestone pursuant to purchase agreement (Note 4B) | (*) | |||||||||||||||||||||||||||
| Exercise of prefunded warrants into shares (Note 3A) | (*) | |||||||||||||||||||||||||||
| Exchange of warrants into shares (Note 3B) | ( | ) | ||||||||||||||||||||||||||
| Issuance of warrants through private placement transaction (Note 3F) | - | |||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Balance as of April 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Issuance of restricted shares as compensation towards directors | (*) | ( | ) | |||||||||||||||||||||||||
| Issuance of Common Stock upon private placement transaction (Note 3D) | (*) | |||||||||||||||||||||||||||
| Restricted shares to be issued as compensation towards directors | - | |||||||||||||||||||||||||||
| Issuance of warrants through private placement transaction (Note 3F) | - | |||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| (*) |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
| 6 |
GLUCOTRACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of US Dollars) (Unaudited)
Six-month period ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Loss for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Issuance of restricted shares as compensation towards directors | ||||||||
| Linkage difference on principal of loans from stockholders | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Other current assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Other current liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Issuance of notes and warrants through private placement transaction (Note 3F) | ||||||||
| Net proceeds received from underwritten U.S. public offering | ||||||||
| Proceeds received from private placement transaction (Note 3D) | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents, and restricted cash | ( | ) | ||||||
| Change in cash and cash equivalents, and restricted cash | ( | ) | ||||||
| Cash and cash equivalents, and restricted cash at beginning of the period | ||||||||
| Cash and cash equivalents, and restricted cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow activities: | ||||||||
| (a) Net cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| (b) Non-cash investment and financing activities: | ||||||||
| Deemed dividend upon trigger of down round protection | $ | $ | ||||||
| Recognition of right for usage asset against a lease liability (Note 3C) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
| 7 |
GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of US Dollars, except share and per share data)
NOTE 1 - GENERAL
| A. | Glucotrack Inc. (the “Company”) was incorporated on May 18, 2010 under the laws of the State of Delaware. The Company is a medical device company, focused on development of an Implantable Continuous Glucose Monitor (CGM) for persons with Type 1 diabetes and insulin-dependent Type 2 diabetes (the “Glucotrack CBGM Product”). |
| B. | Liquidity and capital resources |
| To
date, the Company has not yet commercialized the Glucotrack CBGM Product. Further development and commercialization efforts are expected
to require substantial additional expenditure. Therefore, the Company is dependent upon external sources for financing its operations.
As of June 30, 2024, the Company has incurred accumulated deficit of $ | |
During
the year ended December 31, 2023, the Company raised net proceeds of $
In
addition, subsequent to the balance sheet date, the Company entered into (i) convertible promissory notes under which the Company
raised gross proceeds of $
The Company plans to finance its operations through the sale of equity and/or debt securities. There can be no assurance that the Company will succeed in obtaining the necessary financing or generating sufficient revenues from sales of its Glucotrack CBGM Product in order to continue its operations as a going concern.
Management has considered the significance of such conditions in relation to the Company’s ability to meet its current obligations and to achieve its business targets and determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The condensed interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
| 8 |
GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| A. | Basis of Presentation |
| The accompanying unaudited condensed interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2023, as was filed with the Securities and Exchange Commission (“SEC”) on March 28, 2024. The unaudited condensed interim consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company’s financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature. | |
| The results for the period of three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period or for any future period. |
| B. | Use of Estimates in the Preparation of Financial Statements |
| The preparation of the condensed interim consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reported periods. Actual results could differ from those estimates. Management believes that there are no critical accounting estimates in these financial statements. |
| C. | Principles of Consolidation |
| The condensed interim consolidated financial statements include the accounts of the Company and its subsidiary. Significant intercompany balances and transactions have been eliminated in consolidation. |
| D. | Cash and Cash Equivalents |
| Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired. |
| E. | Modification of equity-classified contracts |
| The modification or exchange of equity-classified contracts, such as warrants that were classified as equity before the modification or exchange and remained eligible for equity classification after the modification, is accounted for in a similar manner to a modification of stock-based compensation. Accordingly, the incremental fair value from the modification or exchange (the change in the fair value of the instrument before and after the modification or exchange) is recognized as a reduction of retained earnings of increase of accumulated deficit as a deemed dividend. Modifications or exchanges that result in a decrease in the fair value of an equity-classified share-based payment awards are not recognized. In addition, the amount of the deemed dividend is also recognized as an adjustment to earnings available to common shareholders for purposes of calculating earnings per share. |
| 9 |
GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
| F. | Warrants |
| Certain warrants that were issued to several holders are classified as a component of permanent equity since they are freestanding financial instruments that are legally detachable and separately exercisable, do not embody an obligation for the Company to repurchase its own shares, and permit the holders to receive a fixed number of Ordinary Shares upon exercise for a fixed exercise price and thus, are considered as indexed to the Company’s own shares. As such warrants were issued together with financial instruments that are not subsequently measured at fair value and the warrants were measured based on allocation of the proceeds received by the Company in accordance with the relative fair value basis. When applicable, direct issuance expenses that were allocated to certain warrants were deducted from additional paid-in capital. |
| G. | Leases |
The Company applies ASC Topic 842, “Leases” (“ASC 842”) under which the Company determines if an arrangement is a lease at inception. The Company’s assessment is based on: (i) whether the contract involves the use of an identified asset, (ii) whether the Company obtains the right to substantially all of the economic benefits from the use of the asset throughout the period of use, and (iii) whether the Company has the right to direct the use of the asset.
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or (v) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of lease term. A lease is classified as an operating lease if it does not meet any one of these criteria. Since all the Company’s lease contracts for premises do not meet any of the criteria above, the Company concluded that all its lease contracts should be classified as operating leases.
Right of Use (“ROU”) assets and liabilities are recognized on the commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company uses its Incremental Borrowing Rate (“IBR”) based on the information available on the commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Moreover, the ROU asset may also include initial direct costs, which are incremental costs of a lease that would not have been incurred if the lease had not been obtained. The Company uses the long-lived assets impairment guidance in ASC 360-10, “Property, Plant, and Equipment - Overall”, to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize. Certain leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate is considered unless it is reasonably certain that the Company will not exercise the option. |
| 10 |
GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
| G. | Basic and diluted loss per share |
Basic loss per share is computed by dividing the loss for the period applicable (after considering the effect of deemed dividend related to trigger of down round protection feature) for Common Stockholders by the weighted average number of shares of Common Stock outstanding and shares of Common Stock to be issued upon achievement of performance milestone during the period and upon exercise of pre-funded warrants. In computing, diluted loss per share, basic earnings per share are adjusted to reflect the potential dilution that could occur upon the exercise of options or warrants issued or granted using the “treasury stock method”, if the effect of each of such financial instruments is dilutive. In computing diluted loss per share, the average stock price for the period is used in determining the number of Common Stock assumed to be purchased from the proceeds to be received from the exercise of stock options or stock warrants.
Shares to be issued upon exercise of all stock options and stock warrants, have been excluded from the calculation of the diluted net loss per share for all the reported periods for which net loss was reported because the effect of the common shares issuable as result of the exercise or conversion of these instruments was anti-dilutive. |
| The net loss and the weighted average number of shares of Common Stock used in computing basic and diluted net loss per Common Stock for the period of six and three month ended June 30, 2024 and 2023, is as follows: |
| US dollars (except share data) | US dollars (except share data) | |||||||||||||||
Six-month period ended June 30, | Three-month period ended June 30, | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | $ | $ | $ | ||||||||||||
| Deemed dividend related to trigger of down round protection feature | ||||||||||||||||
| Net loss attributable to common stockholders | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Shares of Common Stock used in computing basic and diluted net loss per common stock | ||||||||||||||||
| Shares of Common Stock to be issued upon exercise of pre-funded warrants | ||||||||||||||||
| Shares of Common Stock to be issued upon achievement of second performance milestone | ||||||||||||||||
| Weighted average number of Common Stock outstanding used in computing basic and diluted net loss per share | ||||||||||||||||
| Basic and diluted net loss per common stock | $ | $ | $ | $ | ||||||||||||
| 11 |
GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)
(in thousands of US Dollars)
NOTE 3 - SIGNIFICANT TRANSACTIONS
| A. | Exercise of pre-funded warrants |
| On January 3, 2024, a number of pre-funded warrants granted through underwritten public offering in April 2023 have been fully exercised into the same number of shares of Common Stock of the Company. |
| B. | Exchange Agreement |
| On February 13, 2024, the Company entered into an Exchange Agreement with certain warrant holders (the “Holders”), pursuant to which the Company and the Holders agreed to exchange (the “Exchange”) warrants with down round protection feature exercisable to common shares (the “Warrants”) owned by the Holders for shares of Common Stock to be issued by the Company. | |
| On February 13, 2024, the Company closed the Exchange and issued to the Holders on February 15, 2024 an aggregate of shares of Common Stock in exchange for Warrants (the “Shares”). | |
It
was also agreed that the Holders will not, during the period (“Lock-Up Period”)
(i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any
Shares, (ii) enter into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the Shares of, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Shares or such other
securities, in cash or otherwise, (iii) make any demand for or exercise any right with respect
to, the registration of any Shares or any security convertible into or exercisable or exchangeable
for shares of common stock, or (iv) publicly announce an intention to effect any transaction
specific in clause (i), (ii) or (iii) above, provided however that the Holder, during the
Lock-Up Period, may
The Lock-Up Period shall expire at the earliest of (i) 365 days after the date hereof or (ii) until the Shares traded above $ per Share for five consecutive trading days.
The Company accounted for the Exchange of the aforesaid warrants with shares as deemed dividend which was calculated at the closing date by the management using the assistance of external appraiser as the excess of fair value of the share to be issued after taking into consideration a discount for lack of marketability at a rate of 16.81% over the Lock-Up Period over the fair value of the original equity instrument (i.e. warrants which included down round protection feature). However, since the fair value of the new equity instrument was estimated as lesser than the fair value of the replaced equity instrument, deemed dividend was not recorded. |
| C. | Lease Agreement |
| On
February 19, 2024, the Company entered into Lease Agreement (the “Agreement”) with Tapsak Enterprises LLC dba Virginia
Analytical (the “Landlord”) under which it was agreed that the Company will lease from the Landlord a premises located
in Front Royal, Virginia area for a monthly rental fee of $ | |
| In addition, the Company has an option to renew the Initial Lease Period for another two additional periods of 3-years each following the Initial Lease Period (the “Option Term”), following advanced notice as defined in the Agreement. The monthly rental fee over the Option Term shall be the fair market rate determined as what is a comparable cost for similar property in Front Royal, Virginia area. |
| 12 |
GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)
(in thousands of US Dollars)
NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.)
| C. | Lease Agreement (Cont.) |
In
accordance with the provision of ASC 842, Leases, at the commencement date of the Agreement,
the Company recognized the right to usage asset equals to lease liability in total amount
of $
As part of the leasing period, the Company considered only the Initial Lease Period as the realization of the option to extend the period was not considered as reasonably certain. |
Operating lease:
| June
30, 2024 | ||||
| Operating right of use asset | $ | |||
| Current operating lease liability | $ | |||
| Non-Current operating lease liability | $ | |||
Maturity analysis of the Company’s lease liability:
| June
30, 2024 | ||||
| Less than one year | $ | |||
| Between 1-2 years | ||||
| More than 2 years | ||||
| Total operating lease payments | $ | |||
| Less: imputed interest | $ | ( | ) | |
| Present value of lease liabilities | $ | |||
Additional information on lease
The following is a summary of weighted average remaining lease terms and discount rate for Company’s leases:
| June 30, 2024 | ||||
| Lease term (years) | ||||
| Weighted average discount rate | % | |||
| D. | Private Placement Agreement |
On
April 22, 2024, the Company entered into a private placement agreement under which the Company
issued shares of its common stock at a price of $ per share for aggregate gross
proceeds of $ |
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GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)
(in thousands of US Dollars)
NOTE 3 - SIGNIFICANT TRANSACTIONS (CONT.)
| E. | Adoption of 2024 Equity Incentive Plan and Reverse Share Split |
On
April 26, 2024, the Company held its Annual Meeting of Shareholders (the “Annual Meeting”)
under which the Company’s stockholders approved, inter alia, the following proposals:
(i) adoption of the Company’s 2024 Equity Incentive Plan and (ii) an amendment to Article
IV of the Company’s Certificate of Incorporation, to effect a reverse stock split of
the Company’s Common Stock at a ratio of between one-for-five and one-for-thirty, with
such ratio to be determined at the sole discretion of the Board of Directors. Following the
Annual Meeting, on April 30, 2024, the Company’s Board of Directors approved a
For accounting purposes, all shares, options and warrants to purchase shares of common stock and loss per share amounts have been adjusted to give retroactive effect to the Reverse Share Split for all periods presented in these interim consolidated financial statements. Any fractional shares resulting from the Reverse Share Split were rounded up to the nearest whole share. |
| F. | Note and Warrant Purchase Agreements |
On
June 27, 2024, the Board of Directors approved the Company to enter into note and warrant
purchase agreements with certain officers, directors and existing investors, providing
for the private placement of unsecured promissory notes in the aggregate principal amount
of $
Each
Warrant has an exercise price of $
At
the initial date, the total proceeds received of $ |
| Fair value at Closing Date | ||||
| Notes (1) | $ | |||
| Warrants (2) | ||||
| $ | ||||
| (1) | ||
| (2) |
The Note is accounted for as a financial liability measured at amortized cost. At subsequent dates, the Company recognized a discount expense over the economic life of the Notes based on the effective interest rate method. However, during the period of six month, discount expense were de minimis.
| 14 |
GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)
(in thousands of US Dollars)
NOTE 4 - COMMITMENTS AND CONTINGENT LIABILITIES
| A. | On March 4, 2004, the Israeli
Innovation Authority (IIA) provided Integrity Israel with a grant of approximately $ |
| B. | On October 7, 2022 (“the Closing Date”), the Company entered into Intellectual Property Purchase Agreement (the “Agreement”) with Paul Goode, which is the Company’s Chief Executive Officer (the “Seller”), under which it was agreed that on and subject to the terms and conditions of the Agreement, at the Closing Date, Seller shall sell, assign, transfer, convey and deliver to the Company, all of Seller’s right, title and interest in and to the following assets, properties and rights (collectively, the “Purchased Assets”): |
| (a) | All rights, title, interests in all current and future intellectual property, including, but not limited to patents, trademarks, trade secrets, industry know-how and other IP rights relating to an implantable continuous glucose sensor (collectively, the “Conveyed Intellectual Property”); and | |
| (b) | All the goodwill relating to the Purchased Assets. |
In
consideration for the sale by Seller of the Purchased Assets to the Company, at the Closing Date, the Company paid to Seller cash
in the amount of one dollar and obligated to issue up to shares of Common Stock to be issued based upon specified performance
milestones as set forth in the Agreement (the “Purchase Price”). In addition, if upon the final issuance, the aggregate
shares represent less than
When the Company acquires net assets that do not constitute a business, as defined under ASU 2017-01 Business Combinations (Topic 805) Clarifying the Definition of a Business (such when there is no substantive process in the acquired entity) the transaction is accounted for as asset acquisition and no goodwill is recognized. The acquired In-Process Research and Development intangible asset (“IPR&D”) to be used in research and development projects which have been determined not to have alternative future use at the acquisition date, is expensed immediately.
At the Closing Date, it was determined that the asset acquisition represents the purchase of IPR&D with no alternative future use. However, the achievement of each of the performance milestones is considered as contingent event outside the Company’s control and thus the contingent consideration which is equal to the fair value of the Purchase Price as measured at the Closing Date will be recognized when it becomes probable that each target will be achieved within the reasonable period of time. Such additional contingent consideration will be recognized in subsequent periods if and when the contingency (the achievement of targets) is resolved.
In June 2023, the
Company achieved the first performance milestone out of the five performance milestones outlined in the Agreement executed between the
Company and the Seller as of the Closing Date. As a result, upon the date of the fulfilment of the first performance milestone the Company
was committed to issue restricted shares to the Seller. Accordingly, the Company recorded an amount of $ |
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GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)
(in thousands of US Dollars)
NOTE 4 - COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
| B. | (Cont.)
In
May 2024, the Company achieved the second performance milestone out of the five performance milestones outlined in the Agreement executed
between the Company and the Seller as of the Closing Date. As result, the Company is committed to issue restricted shares to the
Seller. Accordingly, the Company recorded stock-based compensation expenses amounted to $ which representing the quoted price of its
Common Stock at the Closing Date, after taking into consideration a discount for lack of marketability in a rate of
As of June 30, 2024, achievement of all other remaining performance milestones was not considered probable and thus no stock-based compensation expenses were recorded with respect to thereof. |
NOTE 5 - SUBSEQUENT EVENTS
| A. | On July 18, 2024, the
Company entered into a series of convertible promissory notes with three directors, and one member of the Company’s executive
management, providing for the private placement of unsecured convertible promissory notes in the aggregate principal amount of
$ |
The
Notes bear simple interest at the rate of
Except
regarding conversion of the Notes as discussed below, the Company may not prepay the Notes without the written consent of the holder.
If not sooner repaid, all outstanding principal and accrued but unpaid interest on the Notes (the “Note Balance”), as of
the close of business on the day immediately preceding the date of the closing of the next issuance and sale of capital stock of the
Company, in a single transaction or series of related transactions, to investors resulting in gross proceeds to the Company of at least
$
Upon the occurrence of an Event of Default (as defined below), a holder may, by written notice to the Company, declare the Note to be due immediately and payable with respect to the Note Balance. An “Event of Default” means (i) failure by the Company to pay the Note Balance on the Maturity Date, (ii) voluntary bankruptcy, or (iii) involuntary bankruptcy. Upon the occurrence of an Event of Default specified in clause (iii) above, the Note Balance shall automatically and immediately become due and payable, in all cases without any action on the part of the holder.
| 16 |
GLUCOTRACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT.)
(in thousands of US Dollars)
NOTE 5 - SUBSEQUENT EVENTS (Cont.)
| B. | On
July 30, 2024, the Company entered into a convertible promissory note and three warrant agreements
(the “Warrants”) with an existing investor (the “Holder”), providing
for the private placement of a secured convertible promissory note in the aggregate principal
amount of $ |
The
Note bears simple interest at the rate of
Except
with regard to conversion of the Note a or a Sale Transaction as discussed below, the Company may not prepay the Note without the written
consent of the Holder. If Stockholder Approval is obtained, the Note
In
the event of a Sale Transaction on or prior to the Maturity Date, the Company will repay the Holder, at the Holder’s election,
as follows:
Upon
the occurrence of an Event of Default (defined below), a Holder may, by written notice to the Company, declare the Note to be due immediately
and payable with respect to the Note balance. An “Event of Default” means
Each
Warrant becomes exercisable 12 months after its issuance and has term of
| 17 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including statements regarding our future activities, events or developments, including such things as future revenues, capital raising and financing, product development, clinical trials, regulatory approval, market acceptance, responses from competitors, capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success, projected performance and trends, and other such matters, are forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “may,” “will,” “could,” “would,” “should” and other similar words and phrases, are intended to identify forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q are based on certain historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. These statements relate only to events as of the date on which the statements are made and we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All of the forward-looking statements made in this Quarterly Report on Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties that may cause actual results to differ materially. Risks and uncertainties, the occurrence of which could adversely affect our business, include the risks identified under the caption “Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2023. The following discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.
Overview
We are a medical device company focused on the design, development and commercialization of novel technologies for use by people with diabetes. We are currently developing an Implantable CBGM for those with Type 1 diabetes and insulin-dependent Type 2 diabetes.
The Company was founded with a mission to develop Glucotrack®, a noninvasive glucose monitoring device designed to help people with diabetes and pre-diabetics obtain glucose level readings without the pain, inconvenience, cost and difficulty of conventional (invasive) spot finger stick devices. The first generation Glucotrack, which successfully received CE Mark approval, obtained glucose measurements via a small sensor clipped onto one’s earlobe. A limited release beta test in Europe and the Middle East demonstrated the need for an updated product with improved accuracy and human factors. As the glucose monitoring landscape rapidly moved away from point-in-time measurement to continuous measurement since then, the Company recently determined that it would focus its efforts on developing its Implantable CBGM. As such, we have since withdrawn our CE Mark for Glucotrack and are no longer pursuing commercialization of this product or development of any further iterations.
The Company is currently developing an Implantable CBGM for use by Type 1 diabetes patients as well as insulin-dependent Type 2 patients. Implant longevity is key to the success of such a device. We have continued to evolve our sensor chemistry following our successful in-vitro feasibility study demonstrating that a minimum two-year implant life is highly probable with the current sensor design. Recently we announced a 3-year longevity is feasible leveraging both in-vitro and in-silico test results. We have also completed our animal study with an initial prototype system which demonstrated a simple implant procedure and good functionality. The results of both were recently presented in poster form at the American Diabetes Association annual conference. The Company has also initiated a longer-term animal trial (to support projected longevity studies) as well as development of its commercial device. A regulatory submission has been made for a first in human study, expected to initiate in Q3 2024. Further to the above progress on our CBGM product, we have also successfully demonstrated continuous glucose sensing in the epidural space. This latter approach is of importance for patients with painful diabetic neuropathy contemplating spinal cord stimulation therapy for their condition. We believe our technology, if successful, has the potential to be more accurate, more convenient and have a longer duration than other implantable glucose monitors that are either in the market or currently under development.
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Our Senior Management team includes; CEO and President, Paul V. Goode PhD, who has a decorated career developing innovative medical technologies, including at Dexcom and MiniMed, CFO, James Cardwell, CPA who has over 16 years of experience as a Chief Financial Officer and Chief Operating Officer with a concentration in both SEC financial reporting and tax compliance, James P. Thrower PhD, Vice President of Engineering, a seasoned executive formerly of Sterling Medical Devices, Mindray DS USA and Dexcom, Inc., Mark Tapsak PhD, Vice President of Sensor Technology, a medical research scientist who brings over 25 years of experience in the diabetes industry, including previous senior roles at Dexcom and Medtronic, and Drinda Benjamin, Vice President of Marketing, a medical device professional with over 20 years of experience in the medical device and diabetes industry with senior roles at Intuity Medical, Senseonics, Abbott Diabetes, and Medtronic Diabetes. Erin Carter, formerly of Medtronic and Boston Scientific, has joined as an independent board member. Several highly talented and accomplished executives joined the Company as senior advisors to the Board. These include Daniel McCaffrey MBA MA, a world-renowned behavioral scientist and digital health expert formerly at Samsung Health and Dexcom, Inc., and Dr. David C. Klonoff, world renowned endocrinologist and diabetes technology thought leader. We intend to continue to invest in our talent and to expand and strengthen all areas within the Company.
Recent Events
On April 22, 2024, we entered into a private placement agreement under which we issued 79,366 shares of our common stock at a price of $6.3 per share for aggregate gross proceeds of $500,000 to certain members of our executive management, Board of Directors and existing shareholders.
On April 26, 2024, we held our Annual Meeting of Shareholders (the “Annual Meeting”) under which our stockholders approved, inter alia, the following proposals: (i) adoption of our 2024 Equity Incentive Plan; (ii) approved of an amendment to Article IV of our Certificate of Incorporation, as amended, to effect a reverse stock split of the Company’s Common Stock at a ratio of between one-for-five and one-for-thirty, with such ratio to be determined at the sole discretion of the Board of Directors. Following the Annual Meeting, on April 30, 2024, the Board of Directors approved a one-for-five reverse split of our issued and outstanding shares of Common Stock (the “Reverse Stock Split”). On May 17, 2024, we filed a Certificate of Amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware which effected the Reverse Stock Split.
On June 27, 2024, the Board of Directors approved us to enter into note and warrant purchase agreements with certain investors, providing for the private placement of unsecured promissory notes in the aggregate principal amount of $100,000 (the “Notes”) and warrants (the “Warrants”) to purchase up to an aggregate of 300,000 shares of our Common Stock. The closing of the private placement occurred on July 1, 2024. The Notes bear simple interest at the rate of 3% per annum and are due and payable in cash on the earlier of: (a) twelve months from the date of the Note; or (b) the date we raise third-party equity capital in an amount equal to or in excess of $1,000,000 (the “Maturity Date”). We may prepay the Notes at any time prior to the Maturity Date without penalty. If an event of default occurs, the then-outstanding principal amount of the Notes plus any unpaid accrued interest will accelerate and become immediately payable in cash. Each Warrant has an exercise price of $4.95 per share. The Warrants are immediately exercisable and have a five-year term.
On July 18, 2024, we entered into a series of convertible promissory notes with certain investors, providing for the private placement of unsecured convertible promissory notes in the aggregate principal amount of $360,000 (the “Notes” and each a “Note”). The Notes bear simple interest at the rate of 8% per annum and are due and payable in cash on the earlier of: (a) the twelve month anniversary of Note, or (b) the date of closing of a Qualified Financing (as defined above). Interest will be computed on the basis of a 365-day year.
On July 30, 2024, we entered into a convertible promissory note and three warrant agreements (the “Warrants”) with an existing investor (the “Holder”), providing for the private placement of a secured convertible promissory note in the aggregate principal amount of $4,000,000 (the “Note”). The Note is not convertible until and unless approved at a meeting of our stockholders. We have agreed to hold such a meeting to seek stockholder approval within 90 days. The Note bears simple interest at the rate of 8% per annum and is due and payable in cash on the earlier of: (i) 12 months anniversary of Note, or (ii) the date of closing of a Sale Transaction (as defined above) (the “Maturity Date”). The Note is secured by a first-priority security interest on all our assets. Each Warrant becomes exercisable 12 months after its issuance and has term of 10 years. The Warrants are exercisable for cash only and have no price-based antidilution. The first Warrant is for 2,133,334 shares at $1.875 per share. The second Warrant is for 1,523,810 shares at $2.625 per share. The third Warrant is for 1,185,186 shares at $3.375 per share.
The summary of our significant accounting policies is included under Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of our fiscal 2023 Form 10-K. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. There have been no material changes to the critical accounting policies and estimates as filed in such report.
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Liquidity and Capital Resources
To date, we have not generated any revenues and have experienced net losses and negative cash flows from our activities.
Since our incorporation, we have devoted substantially all our resources to research and product development and providing general and administrative support for these activities. Since our incorporation, we have incurred significant losses and negative cash flows from operations. During the six months ended June 30, 2024, we incurred a net loss of approximately $7.5 million and used $4.8 million of cash in our operations. As of June 30, 2024, we had an accumulated deficit of approximately $117.3 million. We expect to continue to incur significant and increasing losses and do not expect positive cash flows from operations for the foreseeable future, and our net losses may fluctuate significantly from period to period depending on the timing of and expenditures on our research and development activities.
As of June 30, 2024, the balance of cash and cash equivalents of approximately $159,000 is insufficient for the Company to realize its business plans for the twelve-month period subsequent to the reporting period.
Results of Operations
The following discussion of our operating results explains material changes in our results of operations for the three and six months ended June 30, 2024 compared with the same periods ended June 30, 2023. The discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report.
Consolidated Results of Operations for the Three Months Ended June 30, 2024 and 2023
Research and development expenses
Research and development expenses were approximately $3.6 million for the three-month period ended June 30, 2024, as compared to approximately $627,000 for the prior-year period. The increase is attributable to ramping up product development actives.
Research and development expenses consist primarily of salaries and other personnel-related expenses, materials, animal trials, production labor and other expenses. We expect research and development expenses to marginally increase in 2025 and beyond, primarily due to hiring additional personnel, as well clinical trials for the Glucotrack CBGM; however, we may adjust or allocate the level of our research and development expenses based on available financial resources and based on our commercial needs, including the FDA registration process, specific requirements from customers, development of new Glucotrack CBGM models and others.
Marketing expenses
Marketing expenses were approximately $100,000 for the three-month period ended June 30, 2024, as compared to $0 for the prior-year period. This increase is primarily attributable to business development personnel and professional marketing services.
General and administrative expenses
General and administrative expenses were approximately $802,000 for the three-month period ended June 30, 2024, as compared to approximately $552,000 for the prior-year period. The increase is attributable to professional fees we accrued during the period.
General and administrative expenses consist primarily of professional services, salaries, consulting fees, insurance, travel expenses and other related expenses for executive, finance and administrative personnel, including stock-based compensation expenses. Other general and administrative costs and expenses include facility-related costs not otherwise included in research and development costs and expenses, and professional fees for legal and accounting services.
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Financing income, net
Financing income, net was approximately $2,000 for the three-month period ended June 30, 2024, as compared to financing income of approximately $3,000 for the prior-year period. The change is immaterial.
Net Loss
Net loss was approximately $4.5 million for the three-month period ended June 30, 2024, as compared to approximately $1.2 million for the prior-year period. The increase in net loss is attributable primarily to the increase in our operating expenses, as described above.
Consolidated Results of Operations for the Six Months Ended June 30, 2024 and 2023
Research and development expenses
Research and development expenses were approximately $5.7 million for the six-month period ended June 30, 2024, as compared to approximately $1.3 for the prior-year period. The increase is attributable to professional fees we accrued during the period.
Research and development expenses consist primarily of salaries and other personnel-related expenses, materials, animal trials and other expenses. We expect research and development expenses to marginally increase in 2025 and beyond, primarily due to hiring additional personnel, as clinical trials for the Glucotrack CBGM; however, we may adjust or allocate the level of our research and development expenses based on available financial resources and based on our commercial needs, including the FDA registration process, specific requirements from customers, development of new Glucotrack CBGM models and others.
Marketing expenses
Marketing expenses were approximately $170,000 for the six-month period ended June 30, 2024, as compared to $0 for the prior-year period. This increase is primarily attributable to business development personnel and professional marketing services.
General and administrative expenses
General and administrative expenses were approximately $1.5 million for the six-month period ended June 30, 2024, as compared to approximately $1.2 million for the prior-year period. The increase is attributable to professional fees we accrued during the period.
General and administrative expenses consist primarily of professional services, salaries, consulting fees, insurance, travel expenses and other related expenses for executive, finance and administrative personnel, including stock-based compensation expenses. Other general and administrative costs and expenses include facility-related costs not otherwise included in research and development costs and expenses, and professional fees for legal and accounting services.
Financing income, net
Financing income, net was approximately $26,000 for the six-month period ended June 30, 2024, as compared to financing income of approximately $1,000 for the prior-year period. The increase is attributable to interest income received during the period.
Net Loss
Net loss was approximately $7.4 million for the six-month period ended June 30, 2024, as compared to approximately $2.5 million for the prior-year period. The increase in net loss is attributable primarily to the increase in our operating expenses, as described above.
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Cash Flows for the Six Months Ended June 30, 2024 and 2023
Operating Activities
Net cash used in operating activities was approximately $4.8 million and approximately $2.3 million for the six-month periods ended June 30, 2024 and 2023, respectively. Net cash used in operating activities primarily reflects the net loss for those periods of approximately $7.4 million and approximately $2.5 million, respectively.
Investing Activities
Net cash used in investing activities was $71,000 and $0 for the six-month periods ended June 30, 2024 and 2023, respectively. Net cash used in investing activities primarily reflects the purchasing of fixed assets.
Financing Activities
Net cash provided by financing activities was approximately $580,000 and $8.7 million for the six-month periods ended June 30, 2024 and 2023, respectively. Net cash provided by financing activities primarily reflects the proceeds received from private placement transaction in 2024 versus net proceeds received upon completion of public offering.
Off-Balance Sheet Arrangements
As of June 30, 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Critical Accounting Policies
This Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our condensed consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Going Concern Uncertainty
The development of the implantable continuous glucose sensor product is expected to require substantial further expenditures. We remain dependent upon external sources for financing our operations. Since inception, we have incurred substantial accumulated losses and negative operating cash flow and have a significant accumulated deficit. We do not have any committed external source of funds or other support for our development efforts, and we cannot be certain that additional funding will be available on acceptable terms, or at all. Until we can generate sufficient revenue to finance our cash requirements, which we may never do, we expect to finance our future cash needs through a combination of public or private equity offerings, debt financings, collaborations, government funding, strategic alliances, licensing arrangements, and other marketing or distribution arrangements, any of which may include terms that may adversely affect our stockholders’ rights. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may have to significantly delay, scale back or discontinue our development or commercialization initiatives. Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline. As of June 30, 2024, we believe that our cash on hand will not provide sufficient working capital to fund its current operations and animal trial program for the development of its Implantable CGM for a period of twelve-months subsequent to the reporting period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2024 (the “Evaluation Date”). Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are ineffective in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is not accumulated and communicated to management, including our principal executive and financial officers, in a manner sufficient to allow timely decisions regarding required disclosure, due to the material weaknesses in internal control over financial reporting related to lack of sufficient internal accounting personnel, segregation of duties, and lack of sufficient internal controls (including IT general controls) that encompass the Company as a whole with respect to entity and transactions level controls in order to ensure complete documentation of complex and non-routine transactions and adequate financial reporting.
Management has identified corrective actions to remediate such material weaknesses, which includes hiring additional employees and engaging in external financial reporting consultants. Management intends to implement procedures to remediate such material weaknesses during the fiscal year 2024; however, the implementation of these initiatives may not fully address any material weaknesses that we may have in our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. At June 30, 2024, except as described in the preceding paragraph, the Company did not have any pending claims, charges or litigation that were expected to have a material adverse impact on its financial position, results of operations or cash flows.
Item 1A. Risk Factors.
You should carefully consider the factors discussed in Part I, Item 1A., “Risk Factors” in our Annual Report for the fiscal year ended December 31, 2023, which could materially affect our business, financial position, or future results of operations. The risks described in our Annual Report for the fiscal year ended December 31, 2023, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial position, or future results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. The risk factor set forth below supplements and updates the risk factors previously disclosed and should be read together with the risk factors described in our Annual Report for the fiscal year ended December 31, 2023 and with any risk factors we may include in subsequent periodic filings with the SEC.
We may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates.
Given the current momentum for continuous glucose monitoring (“CGM”) in the diabetes market, we have announced our decision to reset our priorities, improve our commercial outlook and refine our business strategy to focus on our implantable CGM technology. Should our efforts to focus on CGM not be successful, we will need to further evaluate our business strategy and, as a result, our Board of Directors may decide that it is in the best interest of our stockholders to dissolve our Company and liquidate our assets or otherwise modify our strategy in the future. In this regard, we may, from time to time, focus our product development efforts on different product candidates or may delay, suspend or terminate the future development of a product candidate at any time for strategic, business, financial or other reasons. As a result of changes in our strategy, we have and may in the future change or refocus our existing product development, commercialization and manufacturing activities. This could require changes in our facilities and our personnel. Any product development changes that we implement may not be successful. In particular, we may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates. Our decisions to allocate our research and development, management and financial resources toward particular product candidates may not lead to the development of viable commercial products and may divert resources from better opportunities. Similarly, our decisions to delay or terminate product development programs may also prove to be incorrect and could cause us to miss valuable opportunities.
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Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our Common Stock.
Our common stock is currently listed for trading on The Nasdaq Stock Market LLC. We must satisfy the continued listing requirements of Nasdaq, to maintain the listing of our common stock on The Nasdaq Stock Market LLC.
On May 26, 2023, we received notice from the Staff indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we were not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). We had 180 days from May 26, 2023, or through November 22, 2023, to regain compliance with the Bid Price Rule.
On November 24, 2023, we received a second letter from Nasdaq notifying the Company that it had been granted an additional 180 calendar days, or until May 20, 2024 (the “Extended Compliance Period”), to regain compliance with the Minimum Bid Price Requirement in accordance with Nasdaq Listing Rule 5810(c)(3)(A).
On May 21, 2024, we received a third letter from Nasdaq (the “Letter”) notifying us that it had not regained compliance with the Minimum Bid Price Requirement during the Extended Compliance Period. The Letter also notified us that our Form 10-Q for the period ended March 31, 2024, indicates that we no longer meet the $2,500,000 minimum stockholders’ equity requirement for continued listing set forth under Listing Rule 5550(b)(1) (the “Minimum Stockholders’ Equity Requirement”). Pursuant to Listing Rule 5810(d)(2), the failure to comply with the Minimum Stockholders’ Equity Requirement has become an additional and separate basis for delisting.
Because we were under review for failure to meet the Minimum Bid Price Requirement, we were not eligible to submit a plan to regain compliance. Accordingly, unless we would request an appeal of this determination by May 28, 2024, trading of our common stock would be suspended at the opening of business on May 30, 2024, and a Form 25-NSE would be filed with the Securities and Exchange Commission (the “SEC”). We timely requested a hearing before a Nasdaq Hearings Panel (the “Panel”). The hearing request would result in a stay of any suspension or delisting action pending the hearing. On August 5, 2024, we received the decision of the Panel, and they granted us an extension to November 18, 2024 to regain compliance with the Minimum Stockholders’ Equity Requirement.
On May 17, 2024, in order to regain compliance with the Minimum Bid Price Requirement, we filed a Certificate of Amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware which effected, as of 4:30 p.m. Eastern Time, on May 17, 2024, a one-for-five Reverse Stock Split of our issued and outstanding shares of Common Stock.
In the event that we are unable to regain and sustain compliance with all applicable requirements for continued listing on the Nasdaq, our Common Stock may be delisted from Nasdaq. If our Common Stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. In addition, delisting would materially and adversely affect our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits.
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: August 13, 2024
| GLUCOTRACK, INC. | ||
| By: | /s/ James Cardwell | |
| Name: | James Cardwell | |
| Title | Chief Financial Officer | |
| (Principal Financial Officer) | ||
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