GlucoTrack, Inc. - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

or

Commission File Number: 001-41141

GLUCOTRACK, INC.

(Exact name of registrant as specified in its charter)

(201) 842-7715

(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:

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

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 11, 2023, 20,892,193 shares of the Company’s common stock, par value $0.001 per share, were outstanding.

GLUCOTRACK INC.

TABLE OF CONTENTS

GLUCOTRACK INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GLUCOTRACK INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these condensed consolidated financial statements.

GLUCOTRACK INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

The accompanying notes are an integral part of these condensed consolidated financial statements.

GLUCOTRACK INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these condensed consolidated financial statements.

GLUCOTRACK INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these condensed consolidated financial statements.

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – GENERAL

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basic of Presentation

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

A. Basic of Presentation

 SCHEDULE OF ANTIDILUTIVE NET LOSS AND WEIGHTED AVERAGE

GLUCOTRACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)

NOTE 3 - SIGNIFICANT TRANSACTIONS

NOTE 4 - SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed interim consolidated financial statements were issued (August 14, 2023). Based upon this review, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.

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, 2022. 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 and prediabetes. We are currently developing two products; a non-invasive glucose monitor for use by those with Type 2 diabetes and prediabetes, and an implantable continuous glucose monitor 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 (“GlucoTrack 1.0”), which successfully received CE Mark approval and ISO certifications, utilized a combination of ultrasound, electromagnetic and thermal technologies to obtain glucose measurements in approximately one minute via a small sensor that is clipped onto one’s earlobe and connected to a small, handheld control and display unit, all without drawing blood or interstitial fluid. After a limited release beta test in Europe and the Middle East, the Company determined that it would focus its efforts on developing its next generation non-invasive monitor (“GlucoTrack 2.0”), and we have since withdrawn our CE Mark and ISO certifications for GlucoTrack 1.0 and are no longer pursuing commercialization of this product.

Instead, we are currently developing GlucoTrack 2.0. The current clinical prototype utilizes ultrasound-only sensor technology, reduces the overall cost and complexity of the device, and reduces the measurement time from approximately sixty seconds to less than two seconds. Initial testing has produced promising results, suggesting measurement accuracies could be relatively comparable with those of conventional, already in-the-market CGM technologies. Internal development efforts continue toward a robust measurement technique that consistently achieves significant measurement accuracy in normal use applications. A first-in-human (FIH) clinical study will begin once this metric has been achieved.. Collecting data for sensor characterization and algorithm development will be the primary goals of the FIH study. The results of this study will also drive the development of the commercial version of the device, which is expected to commence early 2024.   Once the development of the commercial device version is complete, we intend to conduct a scaled down version of the FDA pivotal trial to resolve any lingering device performance or human factors issues prior to executing the larger pivotal trial for FDA submission.

Following the acquisition of certain IP in the fourth quarter of 2022, we are also developing an implantable continuous glucose monitor 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, and we have recently completed our feasibility study successfully demonstrating that a minimum two-year implant life is highly probable with the current sensor design. 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.

We are currently developing our own companion applications and a cloud-based solutions to offer an effective platform to provide real time, data driven personalized tools to effectively help a user manage their diabetes, which will be utilized during the clinical trials. In addition to being a critical and effective management tool for the end user, we believe that third parties such as insurers, pharmaceutical companies and advertisers would be willing to pay for the de-identified data that we will obtain through our platform, and that this is an opportunity for us to develop an additional revenue source.

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 and General Counsel, Jolie Kahn, Esq., who has a multidecade career as a well respected securities attorney and finance professional, James P. Thrower PhD, Vice President of Engineering, a seasoned executive formerly of Sterling Medical Devices, Mindray DS USA and DexCom, Inc., and 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. Luis J. Malavé, formerly of Insulet Corp, Medtronic and MiniMed has joined as an independent board member. Several highly talented and accomplished executives joined the Company as senior advisors to the Board. These include Yair Briman, the former CEO of Philips Healthcare Informatics, Daniel McCaffrey MBA MA, a world-renowned behavioral scientist and digital health expert formerly at Samsung Health and Dexcom, Inc., Dr. Alexander Raykhman PhD, a measurement and artificial intelligence expert 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 March 14, 2022, we changed our name to GlucoTrack, Inc. and our trading symbol to GCTK.

On March 22, 2022, Shalom Shushan, Chief Technology Officer, provided notice of his resignation from the Company, effective May 22, 2022, for personal reasons. In connection with the Company’s previously announced plans to migrate certain aspects of product development to the United States, James P. Thrower PhD, Vice President of Engineering, assumed Mr. Shushan’s responsibilities.

In connection with the Company’s previously announced plans to migrate certain aspects of the product development to the United States, as well as in preparation for U.S. clinical trials, Erez Ben-Zvi, VP of Product in Israel, resigned from the Company, effective June 12, 2022.

On October 10, 2022, the Company announced that it has acquired certain IP related to a long-term implantable continuous glucose monitor and that it intends to develop the technology to address the growing Type 1 and insulin dependent Type 2 diabetes market.

On October 14, 2022, the Company announced the hiring of Dr. Mark Tapsak as Vice President of Sensor Technology.

On November 22, 2022, Nasdaq provided notice that pursuant to Nasdaq Listing Rule 5550(b)(1), the Company did not meet the alternatives of market value of listed securities or net income from continuing operations.

On January 4, 2023, Nasdaq provided notice that since the Company had not held an annual meeting of shareholders within twelve months of the end of the Company’s fiscal year end ended December 31, 2021, it no longer complied with Listing Rules for continued listing.

On February 7, 2023, Nasdaq issued a letter to the Company granting an extension until May 22, 2023 to obtain compliance with the Listing Rule 5550(b).

On March 31, 2023, GlucoTrack, Inc. held its 2022 Annual Meeting of Shareholders. The results of the voting with respect to this Annual Meeting are as set forth below.

On April 17, 2023, the Company announced the closing of a firm commitment underwritten public offering of shares of its common stock with gross proceeds to the Company of approximately $10 million, before deducting underwriting discounts and other estimated expenses. The offering consisted of 5,376,472 shares of common stock and 1,976,470 pre-funded warrants to purchase shares of common stock at a price to the public of $1.36 per share (less $0.001 in exercise price per pre-funded warrant). The Company entered into an underwriting agreement with Aegis Capital Corp. on April 13, 2023. The Company intends to use the net proceeds from this offering primarily for working capital and general corporate purposes, which may include, without limitation, engaging in acquisitions or other business combinations or investments, sales and marketing activities, general and administrative matters and capital expenditures.

On July 25, 2023, the Company announced the completion and positive results of its feasibility study for its implantable continuous glucose monitor technology for patients with Type 1 and Type 2 insulin-dependent diabetes. The primary goal of the feasibility study was to demonstrate that the CGM sensor design could reliably report glucose measurements for two years post-implant. Laboratory bench testing confirmed that a minimum two-year implant longevity is highly probable with the current sensor design. The implant longevity was independently verified by a third-party using sensor parameters to simulate sensor performance over time. Given the positive results of the study, the Company is now preparing for long-term animal studies, which are expected to begin later this year.

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 2022 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.

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 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.

Results of Operations

The following discussion of our operating results explains material changes in our results of operations for the six month period ended June 30, 2023 compared with the same period ended June 30, 2022. The discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report.

Six Months ended June 30, 2023 compared to Six Months ended June 30, 2022

Research and development expenses

Research and development expenses were $1,269 thousand for the six-month period ended June 30, 2023, as compared to $929 thousand 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, clinical trials and other expenses. We expect research and development expenses to increase in 2023 and beyond, primarily due to hiring additional personnel and developing and validating our next generation product line, 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® models and others.

General and administrative expenses

General and administrative expenses were $1,194 thousand for the six-month period ended June 30, 2023, as compared to $1,287 thousand for the prior-year period. The decrease 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 (expenses), net

Financing expenses, net was approximately $1 thousand for the six-month period ended June 30, 2023, as compared to financing income of $4 thousand for the prior-year period. The change is immaterial.

Net Loss

Net loss was $2,462 thousand for the six-month period ended June 30, 2023, as compared to $2,220 thousand for the prior-year period. The increase in net loss is attributable primarily to the increase in our operating expenses, as described above.

Going Concern Uncertainty

The development and commercialization of GlucoTrack 2.0 product are 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. However, in April 2023, we completed an underwriting U.S. public offering under which net proceeds of $8,730 thousand has been raised. As of June 30, 2023, our cash on hand is sufficient to continue our operations for a period of twelve-months subsequent to the reporting period.

Net Cash Used in Operating Activities for the Six-Month Periods Ended June 30, 2023 and June 30, 2022

Net cash used in operating activities was $2,269 thousand and $2,181 thousand for the six-month periods ended June 31, 2023 and 2022, respectively. Net cash used in operating activities primarily reflects the net loss for those periods of $2,462 thousand and $2,220 thousand, respectively.

Net Cash Used in Investing Activities for the Six-Month Periods Ended June 30, 2023 and June 30, 2022

Net cash used in investing activities was $0 thousand and $4 thousand for the six-month periods ended June 30, 2023 and 2022, respectively. Net cash used in investing activities primarily reflects the purchasing of fixed assets.

Net Cash Used in Financing Activities for the Six-Month Periods Ended June 30, 2023 and June 30, 2022

Net cash provided by financing activities was $8,730 thousand and $0 thousand for the six-month periods ended June 30, 2023 and 2022, respectively. Net cash provided by financing activities primarily reflects the net proceeds received from public offering, net of offering expenses.

Off-Balance Sheet Arrangements

As of June 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

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, 2023, or 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. Management intends to implement procedures to remediate such material weaknesses during the fiscal year 2023; 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.

PART II - OTHER INFORMATION

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 6. Exhibits.

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 14, 2023