GlucoTrack(GCTK) - 2019 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the nine and three months ended September 30, 2019, detailing financial position, performance, and cash flows, while highlighting a net loss and going concern uncertainty Condensed Consolidated Financial Statements This section presents the company's financial position and performance as of September 30, 2019, showing increased assets and revenues, a continued net loss, and a significant stockholders' deficit, with cash increasing due to financing activities Condensed Consolidated Balance Sheets (at period end) | | September 30, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | Total current assets | 1,440,292 | 314,145 | | Total assets | 1,973,641 | 688,186 | | Total current liabilities | 2,440,222 | 3,221,609 | | Total liabilities | 2,836,457 | 3,561,487 | | Total stockholders' (deficit) | (862,816) | (2,873,301) | Condensed Consolidated Statements of Operations | | Nine Months Ended Sep 30, 2019 ($) | Nine Months Ended Sep 30, 2018 ($) | | :--- | :--- | :--- | | Revenues | 140,255 | 43,488 | | Total operating expenses | 3,040,087 | 5,570,847 | | Operating loss | (2,899,832) | (5,527,171) | | Loss for the period | (2,917,287) | (5,383,155) | | Loss per share (Basic & Diluted) | (0.01) | (0.96) | Condensed Consolidated Statements of Cash Flows (Nine Months Ended Sep 30) | | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (3,102,508) | (3,802,460) | | Net cash used in investing activities | (22,554) | (13,669) | | Net cash provided by financing activities | 4,198,574 | 4,705,828 | Notes to Condensed Consolidated Financial Statements This section details the basis of presentation, significant accounting policies, and specific events, highlighting a going concern uncertainty, recent financing activities, and the adoption of new lease accounting standards - The company has an accumulated deficit of $90,104,070, negative operating cash flows, and negative working capital, which raises substantial doubt about its ability to continue as a going concern[28] - During the first nine months of 2019, the company raised approximately $4.2 million in net proceeds from the issuance and sale of 1,083,004 Series D Units[54] - The company adopted the new lease accounting standard (Topic 842), recognizing right-of-use (ROU) assets and corresponding liabilities of $225 thousand upon adoption[51] - Subsequent to the quarter end, an officer resigned in October 2019, and a new independent director, Allen E. Danzig, was appointed to the Board[70][71] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results, highlighting cost-reduction measures, product development for its GlucoTrack® device, increased revenue, decreased operating expenses, and critical liquidity concerns requiring further capital raising - The company is focused on the commercialization of its GlucoTrack® non-invasive glucose monitor and is developing next-generation products, including a wireless ear-clip and a self-calibration module[75][83][84] - Management has taken measures to restructure, reduce costs, and streamline expenses to deploy capital towards business development and bringing the product fully to market[76][77] - A going concern uncertainty exists due to a substantial accumulated deficit and negative operating cash flows, making the company dependent on external financing[88] Results of Operations For the nine months ended September 30, 2019, revenues increased significantly due to new market entries, while total operating expenses and net loss decreased substantially due to broad cost reductions, with similar trends for the three-month period Comparison of Nine Months Ended September 30, 2019 vs 2018 | Metric | 9 Months 2019 ($) | 9 Months 2018 ($) | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Revenues | 140,255 | 43,488 | +222% | Orders shipped to two new markets | | R&D Expenses | 1,203,616 | 1,818,108 | -34% | Completion of clinical trials and lower salary expenses | | S&M Expenses | 444,555 | 857,386 | -48% | Reduced business development personnel in Europe | | G&A Expenses | 1,391,916 | 2,894,553 | -52% | Departure of former CEO and reduction in professional fees | | Net Loss | (2,917,287) | (5,383,155) | -46% | Increased revenue and lower operating expenses | - For the three months ended Sep 30, 2019, revenues were $4,175 (vs. $0 in 2018), and net loss decreased to $996,777 from $1,572,878 in the prior-year period, mainly due to lower operating expenses[117][125] Liquidity and Capital Resources The company's liquidity is critically low, with $1.22 million cash on hand projected to fund operations for only five months, necessitating additional capital raising despite recent financing activities - Cash on hand was approximately $1,222,280 as of September 30, 2019[126] - Management believes current cash is only sufficient to fund operations for a period of five months from the date of the report, necessitating additional capital raising[126] - Net cash provided by financing activities was $4.2 million for the nine-month period, reflecting capital raised from the issuance of Series D Units[131] - Net cash used in operating activities for the nine-month period was $3.1 million[129] Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies - As a smaller reporting company, Integrity Applications, Inc. is not required to provide these disclosures[134] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that as of September 30, 2019, the company's disclosure controls and procedures were effective at the reasonable assurance level[135] - There were no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[136] PART II - OTHER INFORMATION Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's unregistered sales of equity securities, including a private placement of Series D Units that raised $4.87 million in gross proceeds and related compensation to the placement agent - The company received aggregate gross proceeds of $4,873,520 from the private placement of its securities to accredited investors during the nine-month period ending September 30, 2019[138] - The private placement was conducted as a transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933[138] - The placement agent for the offering received a cash commission of 10%, a non-accountable expense allowance of 3%, and warrants to purchase common stock[141] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, officer certifications, and XBRL interactive data files - Lists key exhibits filed with the report, including corporate formation documents, officer certifications (SOX 302 & 906), and XBRL data files[142]