Glucotrack, Inc. 10-Q

Item 1. Financial Statements GLUCOTRACK INC. CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2022 December 31, 2021 In thousands of US dollars (except share data) September 30, 2022 December 31, 2021 (Unaudited) Current Assets Cash and cash equivalents 3,241 6,062 Other current assets 187 43 Total current assets 3,428 6,105 Operating lease right-of-use assets, net - 40 Property and equipment, net 44 69 Restricted Cash 39 51 TOTAL ASSETS 3,511 6,265 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable 713 631 Operating lease liabilities, current - 23 Other current liabilities 252 229 Total Current Liabilities 965 883 Non-current Liabilities Loans from Stockholders 191 210 Operating lease liabilities, non-current - 17 Total Non-current liabilities 191 227 Total Liabilities 1,156 1,110 Stockholders’ Equity Common Stock of $ 0.001 par value (“Common Stock”): 500,000,000 shares authorized; 15,476,665 and 15,452,285 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 15 15 Additional paid-in capital 102,906 102,612 Accumulated other comprehensive income (loss) 30 ( 6 ) Receipts on account of shares 18 - Accumulated deficit ( 100,614 ) ( 97,466 ) Total Stockholders’ equity 2,355 5,155 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 3,511 6,265 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 GLUCOTRACK INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2022 2021 2022 2021 In thousands of US dollars (except share data) Nine-month period ended September 30, Three-month period ended September 30, (Unaudited) (Unaudited) 2022 2021 2022 2021 Research and development 1,363 1,077 434 447 Marketing expenses - 136 - 113 General and administrative 1,782 1,323 495 207 Total operating expenses 3,145 2,536 929 767 Operating Loss ( 3,145 ) ( 2,536 ) ( 929 ) ( 767 ) Other expenses ( 1 ) ( 46 ) ( 1 ) ( 46 ) Finance Income (Expenses), net ( 2 ) 21 2 9 Net Loss ( 3,148 ) ( 2,561 ) ( 928 ) ( 804 ) Other comprehensive income (expenses): Foreign currency translation adjustment 36 ( 11 ) ( 1 ) ( 4 ) Comprehensive loss for the period ( 3,112 ) ( 2,572 ) ( 929 ) ( 808 ) Net Loss per Common Stock Basic ( 0.20 ) ( 0.17 ) ( 0.06 ) ( 0.05 ) Diluted ( 0.20 ) ( 0.17 ) ( 0.06 ) ( 0.05 ) Average number of Common Stock used in computing basic and diluted loss per share 15,468,279 15,448,923 15,473,521 15,451,726 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 GLUCOTRACK INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY Numbers of Shares Amount Paid-in Capital account of shares Comprehensive Loss Accumulated Deficit Stockholders’ Equity In thousands of US Dollars (except share data) (Unaudited) Common Stock Additional Receipts on Accumulated Other Total Numbers of Shares Amount Paid-in Capital account of shares Comprehensive Loss Accumulated Deficit Stockholders’ Equity Balance at January 1, 2021 15,444,697 15 102,351 - 15 ( 93,399 ) 8,982 Loss for the period - - - - - ( 2,561 ) ( 2,561 ) Other comprehensive loss - - - - ( 11 ) - ( 11 ) Issuance of restricted shares as compensation towards directors ( * ) - - - 25 - - 25 Stock-based compensation - - 66 - - - 66 Balance at September 30, 2021 15,444,697 15 102,417 25 4 ( 95,960 ) 6,501 Balance at July 1, 2021 15,444,697 15 102,409 10 8 ( 95,156 ) 7,286 Loss for the period - - - - - ( 804 ) ( 804 ) Other comprehensive loss - - - - ( 4 ) - ( 4 ) Stock-based compensation - - 8 - - - 8 Issuance of restricted shares as compensation towards directors ( * ) - - - 15 - - 15 Balance at September 30, 2021 15,444,697 15 102,417 25 4 ( 95,960 ) 6,501 Balance at January 1, 2022 15,452,285 15 102,612 - ( 6 ) ( 97,466 ) 5,155 Loss for the period ( 3,148 ) ( 3,148 ) Other comprehensive income - - - - 36 - 36 Issuance of restricted shares as compensation towards directors 11,275 - 20 - - - 20 Restricted shares to be issued as compensation towards directors ( * ) - - - 18 - - 18 Stock-based compensation 13,105 - 274 - - - 274 Balance at September 30, 2022 15,476,665 15 102,906 18 30 ( 100,614 ) 2,355 Balance at July 1, 2022 15,473,262 15 102,821 9 31 ( 99,686 ) 3,190 Beginning balance, value 15,473,262 15 102,821 9 31 ( 99,686 ) 3,190 Loss for the period - - - - - ( 928 ) ( 928 ) Other comprehensive income (expenses) - - - - ( 1 ) - ( 1 ) Issuance of restricted shares as compensation towards directors ( * ) 3,403 - 9 ( 9 ) - - - Issuance of restricted shares as compensation towards directors 3,403 - 9 ( 9 ) - - - Restricted shares to be issued as compensation towards directors ( * ) - - - 18 - - 18 Restricted shares to be issued as compensation towards directors - - - 18 - - 18 Stock-based compensation - 76 - - - 76 Balance at September 30, 2022 15,476,665 15 102,906 18 30 ( 100,614 ) 2,355 Ending balance, value 15,476,665 15 102,906 18 30 ( 100,614 ) 2,355 (*) Actual issuance occurred subsequent to the balance sheet date. The accompanying notes are an integral part of these condensed consolidated financial statements. 5 GLUCOTRACK INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 2022 2021 In thousands of US Dollars Nine-month period ended September 30. 2022 2021 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period $ ( 3,148 ) $ ( 2,561 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 19 33 Capital loss on sale of property and equipment - 41 Stock-based compensation 274 66 Issuance of restricted shares as compensation towards directors ( * ) 38 - Issuance of restricted shares as compensation towards directors 38 - Linkage difference on principal of loans from stockholders 8 5 Changes in assets and liabilities: Increase in inventory - ( 6 ) Increase in other current assets ( 148 ) ( 9 ) Increase (Decrease) in accounts payable 117 ( 223 ) Increase (Decrease) in other current liabilities 51 ( 142 ) Net cash used in operating activities ( 2,789 ) ( 2,796 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment - 4 Purchase of property and equipment ( 4 ) ( 1 ) Net cash provided by (used in) investing activities ( 4 ) 3 Effect of exchange rate changes on cash and cash equivalents, and restricted cash ( 40 ) ( 14 ) Decrease in cash, cash equivalents, and restricted cash ( 2,833 ) ( 2,807 ) Cash, cash equivalents, and restricted cash at beginning of the period 6,113 9,885 Cash, cash equivalents, and restricted cash, end of period $ 3,280 $ 7,078 (*) Actual issuance occurred subsequent to the balance sheet date. The accompanying notes are an integral part of these condensed consolidated financial statements. 6 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 – GENERAL A. GlucoTrack Inc (the “Company”) was incorporated on May 18, 2010 under the laws of the State of Delaware. On July 15, 2010, GlucoTrack Acquisition Corp. Ltd. (hereinafter: “Integrity Acquisition”), a wholly owned Israeli subsidiary of the Company, which was established on May 23, 2010, completed a merger with A.D. Integrity Applications Ltd. (hereinafter: “Integrity Israel”), an Israeli corporation that was previously held by the stockholders of the Company. Pursuant to the merger, all equity holders of Integrity Israel received the same proportional ownership in the Company as they had in Integrity Israel prior to the merger. Following the merger, Integrity Israel remained a wholly owned subsidiary of the Company. As the merger transaction constituted a structural reorganization, the merger has been accounted for at historical cost in a manner similar to a pooling of interests. Integrity Israel was incorporated in 2001 and commenced its operations in 2002. The Company and Integrity Israel are referred as the “Group”. On December 8, 2021, the Company announced that its shares of Common Stock were approved for listing on the Nasdaq Capital Market (“NASDAQ”). Trading on NASDAQ commenced on December 10, 2021 under its existing trading symbol, IGAP. On March 14, 2022, the Company announced that it has completed its corporate name and ticker symbol change on the Nasdaq Capital Market (from IGAP to GCTK), to be effective at the commencement of trading on March 14, 2022. In connection with its application to list its shares on Nasdaq Capital Market (“NASDAQ”), as detailed above, on August 13, 2021, the Company effected a reverse split of its Common Stock in a ratio of 1 for 13 (the “Reverse Share Split”). For accounting purposes, all Shares, options and warrants to purchase Common Stock and loss per share amounts have been adjusted to give retroactive effect to this 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. B. Going concern uncertainty Since its incorporation, the Company did not conduct any material operations other than the design, development and commercialization of the first generation of non-invasive glucose monitoring devices for use by people with diabetes. The development and commercialization of the second generation of the product is expected to require substantial expenditures. The Company and Integrity Israel have not yet generated significant revenues from operations, and therefore they are dependent upon external sources for financing their operations. As of September 30, 2022, the Group has accumulated deficit of $ 100,614 thousand, and incurred losses and generated negative cash flow from operating activity for the nine-months period. As of September 30, 2022, the Company had $ 3,241 thousand in cash. Management has considered the significance of such condition 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 Company plans to finance its operations through the sale of equity and/or debt securities (including shelf registration statement on Form S-3 that was declared effective on September 27, 2021 by the Securities and Exchange Commission (SEC) and which allows the Company to register up to $ 100,000 thousand of certain equity and/or debt securities of the Company through prospectus supplement). There can be no assurance that the Company will succeed in obtaining the necessary financing or generating sufficient revenues from product sales to continue its operations as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 7 GLUCOTRACK INC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of presentation Accounting Principles The accompanying unaudited condensed consolidated interim financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022. The unaudited condensed 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 nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period or for any future period. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary. Significant intercompany balances and transactions have been eliminated in consolidation Net Loss Per Share Basic loss per share is computed by dividing the loss for the period applicable for holders of our Common Stock by the weighted average number of shares of Common Stock outstanding during the period. 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 exercise of stock options or stock warrants. Shares that will 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 Stock issuable as a result of the exercise or conversion of these instruments was anti-dilutive. Total weighted average number of 6,562,279 and 6,356,344 outstanding stock options and stock warrants have been excluded from the calculation of the diluted net loss per share for the period of nine months ended September 30, 2022 and 2021, respectively, because the effect of the Common stock issuable as a result of the exercise or conversion of these instruments was determined to be anti-dilutive. 8 GLUCOTRACK INC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. Use of estimates in the preparation of financial statements The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. 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 consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these consolidated interim condensed financial statements, the most significant estimates and assumptions relate to the going concern assumptions. NOTE 3 – CASH AND CASH EQUIVALENTS SCHEDULE OF CASH AND CASH EQUIVALENTS US dollars September 30, December 31, 2022 2021 US Dollar 3,226 6,028 Other 15 34 3,241 6,062 NOTE 4 – SUBSEQUENT EVENTS The Company has evaluated all subsequent events through the date when these financial statements were issued to determine if these must be reported. The Company determined that there were no reportable subsequent events to disclose in these financial statements. 9