Glucotrack, Inc. 10-Q

Item 1. Financial Statements GLUCOTRACK INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 2023 December 31, 2022 In thousands of US dollars (except share data) June 30, 2023 December 31, 2022 (Unaudited) Current Assets Cash and cash equivalents $ 8,774 $ 2,312 Other current assets 171 67 Total current assets 8,945 2,379 Property and equipment, net 27 40 Restricted Cash 10 19 TOTAL ASSETS 8,982 2,438 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable 832 672 Other current liabilities 218 341 Total Current Liabilities $ 1,050 $ 1,013 Non-current Liabilities Loans from Stockholders 189 195 Total Non-current liabilities 189 195 Total Liabilities 1,239 1,208 Stockholders’ Equity Common Stock of $ 0.001 par value (“Common Stock”): 500,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 20,892,193 and 15,500,730 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively 20 15 Common Stock of $ 0.001 par value (“Common Stock”) : 500,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 20,892,193 and 15,500,730 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively 20 15 Additional paid-in capital 112,918 103,095 Accumulated other comprehensive income 28 17 Receipts on account of shares - 4 Accumulated deficit ( 105,218 ) ( 101,901 ) Total Stockholders’ equity 7,743 1,230 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 8,982 $ 2,438 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 GLUCOTRACK INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2023 2022 2023 2022 US dollars (except share data) US dollars (except share data) Six-month period ended June 30, Three-month period ended June 30, (Unaudited) (Unaudited) 2023 2022 2023 2022 Research and development $ 1,269 $ 929 $ 627 $ 469 General and administrative 1,194 1,287 552 654 Total operating expenses 2,463 2,216 1,179 1,123 Operating Loss 2,463 2,216 1,179 1,123 Finance Income (Expenses), net ( 1 ) 4 ( 3 ) 4 Net Loss 2,462 2,220 1,176 1,127 Other comprehensive income: Foreign currency translation adjustment ( 11 ) ( 37 ) ( 6 ) ( 30 ) Comprehensive loss for the period $ 2,451 $ ( 2,183 ) $ 1,170 $ ( 1,097 ) Basic net loss per common stock $ ( 0.18 ) $ ( 0.14 ) $ ( 0.09 ) $ ( 0.07 ) Diluted net loss per common stock $ ( 0.18 ) $ ( 0.14 ) $ ( 0.09 ) $ ( 0.07 ) Weighted average number of common shares used in computing basic and diluted loss per common stock 18,532,553 15,465,692 21,561,473 15,473,813 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 of shares Comprehensive Income (Loss) Accumulated Deficit Stockholders’ Equity In thousands of US Dollars (except share data) (Unaudited) Common Stock Additional Receipts on account Accumulated Other Total Numbers of Shares Amount Paid-in Capital of shares Comprehensive Income (Loss) Accumulated Deficit Stockholders’ Equity Balance at January 1, 2023 15,550,730 $ 15 $ 103,095 $ 4 $ 17 $ ( 101,901 ) $ 1,230 Loss for the period - - - - - ( 2,462 ) ( 2,462 ) Other comprehensive income - - - - 11 - 11 Deemed dividend resulted from trigger of down round protection feature of certain warrants granted - - 855 - - ( 855 ) - Issuance of Ordinary Shares upon completion of public offering, net of offering expenses 5,376,472 5 8,725 - - - 8,730 Issuance of restricted shares as compensation towards directors and officer 14,991 - (*) 9 ( 4 ) - - 5 Stock-based compensation - - 229 - - - 229 Balance at June 30, 2023 20,892,193 $ 20 $ 112,913 $ - $ 28 $ ( 105,218 ) $ 7,743 Balance at April 1, 2023 15,503,632 $ 15 $ 103,156 $ 5 $ 22 $ ( 103,187 ) $ 11 Loss for the period - - - - - ( 1,176 ) ( 1,176 ) Other comprehensive income - - - - 6 - 6 Deemed dividend resulted from trigger of down round protection feature of certain warrants granted - - 855 - - ( 855 ) - Issuance of Ordinary Shares upon completion of public offering, net of offering expenses 5,376,472 5 8,725 - - - 8,730 Issuance of restricted shares as compensation towards directors and officer 12,089 - (*) 5 ( 5 ) - - - Stock-based compensation - - 172 - - - 172 Balance at June 30, 2023 20,892,193 $ 20 $ 112,913 $ - $ 28 $ ( 105,218 ) $ 7,743 Balance at January 1, 2022 15,452,285 $ 15 $ 102,612 $ - $ ( 6 ) $ ( 97,466 ) $ 5,155 Loss for the period ( 2,220 ) ( 2,220 ) Other comprehensive income - - - - 37 - 37 Issuance of restricted shares as compensation towards directors (**) 7,872 - (*) 11 9 - - 20 Stock-based compensation 13,105 - 198 - - - 198 Balance at June 30, 2022 15,473,262 $ 15 $ 102,821 $ 9 $ 31 $ ( 99,686 ) $ 3,190 Balance at April 1, 2022 15,452,285 $ 15 $ 102,763 $ 11 $ 1 $ ( 98,559 ) $ 4,231 Beginning balance 15,452,285 $ 15 $ 102,763 $ 11 $ 1 $ ( 98,559 ) $ 4,231 Loss for the period - - - - - ( 1,127 ) ( 1,127 ) Other comprehensive income - - - - 30 - 30 Issuance of restricted shares as compensation towards directors (**) 7,872 - (*) 11 ( 2 ) - - 9 Stock-based compensation 13,105 - (*) 47 - - - 47 Balance at June 30, 2022 15,473,262 $ 15 $ 102,821 $ 9 $ 31 $ ( 99,686 ) $ 3,190 Ending balance 15,473,262 $ 15 $ 102,821 $ 9 $ 31 $ ( 99,686 ) $ 3,190 (*) Represents amount lower than $1. (**) 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 2023 2022 US Dollars Six-month period ended June 30. 2023 2022 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period $ ( 2,462 ) $ ( 2,220 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 7 14 Stock-based compensation 229 198 Issuance of restricted shares as compensation towards directors 5 20 (*) Linkage difference on principal of loans from stockholders 6 6 Changes in assets and liabilities: Increase in other current assets ( 104 ) ( 331 ) Increase in accounts payable 173 18 Increase (Decrease) in other current liabilities ( 121 ) 114 Net cash used in operating activities ( 2,267 ) ( 2,181 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment - ( 4 ) Net cash used in investing activities - ( 4 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds received from underwritten U.S. public offering 8,730 - Net cash provided by financing activities 8,730 - Effect of exchange rate changes on cash and cash equivalents, and restricted cash ( 10 ) ( 30 ) Change in cash, cash equivalents, and restricted cash 6,453 ( 2,215 ) Cash, cash equivalents, and restricted cash at beginning of the period 2,331 6,113 Cash, cash equivalents, and restricted cash, end of period $ 8,784 $ 3,898 Non-cash financing activities Deemed dividend upon trigger of down round protection $ 855 $ - (*) 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. The Company is a medical device company, focused on the design, development and commercialization of novel technologies for use by people with diabetes and prediabetes. The Company is currently developing two products; a non-invasive glucose monitor for use by persons with Type 2 diabetes and prediabetes, and an implantable continuous glucose monitor for persons with Type 1 diabetes and insulin-dependent Type 2 diabetes. B. Liquidity and Going Concern Uncertainty To date, the Company has not yet generated significant revenues from selling of GlucoTrack 1.0 product, a product that has been discontinued. In addition, development and commercialization of both GlucoTrack 2.0 product and the implantable continuous glucose monitor is expected to require substantial expenditures;therefore, the Company is dependent upon external sources for financing its operations. As of June 30, 2023, the Company has incurred accumulated deficit of $ 105,218 thousand. Furthermore, the Company has generated operating losses and negative operating cash flow for all reported periods. 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 do not raise substantial doubt about the Company’s ability to continue as a going concern, taking into consideration the net proceeds received in total amount of $ 8,730 thousand upon closing of a public offering through prospectus supplement on Form S-3 on April 17 2023 (see also Note 3 below). Based on its assessment, management believe that such funds are sufficient for the Company to realize its business plans for the twelve months subsequent to the reporting period. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basic of Presentation 1. Accounting Principles The accompanying unaudited condensed consolidated interim financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2023. 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 period of six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other interim period or for any future period. 2. 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. 7 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) A. Basic of Presentation 3. Net Loss Per Common Stock Basic net loss per Common Stock is computed by dividing the loss for the period applicable for holders of Common Stock and pre-funded warrants by the weighted average number of shares of Common Stock and pre-funded warrants outstanding during the period. Diluted loss per share gives effect to all potentially dilutive common shares outstanding during the period using the treasury stock method with respect to stock options and certain stock warrants. In computing diluted loss per Common Stock, 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 to be issued upon exercise of all stock options and stock warrants have been excluded from the calculation of the diluted net loss per Common Stock for all the reported periods for which net loss was reported because the effect of the Common Stock issuable upon exercise 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 months ended June 30, 2023 and 2022, is as follows: SCHEDULE OF ANTIDILUTIVE NET LOSS AND WEIGHTED AVERAGE 2023 2022 2023 2022 US dollars (except share data) US dollars (except share data) Six-month period ended June 30, Three-month period ended June 30, (Unaudited) (Unaudited) 2023 2022 2023 2022 Numerator: Net loss $ 2,462 $ 2,220 $ 1,176 $ 1,127 Deemed dividend related to trigger of down round protection feature (see Note 3A below) 855 - 855 - Net loss attributable to common stockholders $ 3,317 $ 2,220 $ 2,031 $ 1,127 Denominator: Ordinary shares used in computing basic and diluted net loss per common stock (*) 18,532,553 15,465,692 (*) 21,561,473 15,473,813 Basic and diluted net loss per common stock $ ( 0.19 ) $ ( 0.14 ) $ ( 0.10 ) $ ( 0.07 ) (*) Including pre-funded warrants issued upon completion of underwritten U.S. public offering. 8 GLUCOTRACK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONT.) NOTE 3 - SIGNIFICANT TRANSACTIONS A. Completion of underwritten U.S. public offering On April 13, 2023, the Company completed an underwritten public offering under which the Company received gross proceeds of approximately $ 10,000 thousand for issuance of (i) 5,376,472 shares of common stock and (ii) 1,976,470 pre-funded warrants at a price to the public of $ 1.36 per share. The pre-funded warrants are exercisable for the same number of shares of common stock and may be exercised at any time until exercised in full at an exercise price of $ 0.001 . Upon satisfaction of customary closing conditions, the closing date of the above underwritten public offering was April 17, 2023 (the “Closing Date”). The Company received substantially all the pre-funded warrant’s proceeds upfront (without any conditions) as part of the pre-funded warrant’s purchase price and in return the Company is obligated to issue fixed number of shares of common stock to the holders. Thus, pre-funded warrants were accounted for and were classified as additional paid-in capital as part of the Company’s stockholders’ equity. Total incremental and direct issuance costs amounted to $ 1,270 thousand. These expenses were deducted from additional paid-in capital as they were allocated to shares of Common Stock and pre-funded warrants. Upon closing of underwritten U.S. public offering, a down round protection feature of certain warrants granted in previous years to service providers was triggered by the way of reduction of their exercise price from a price in a range of $ 3.35 -$ 70.20 to a price of $ 1.36 which represented the above public offering price. Such reduction was accounted for as deemed dividend estimated at total amount of $ 855 thousand which was recorded as part of the additional paid-in capital versus increase of accumulated deficit. Regarding the effect of the loss per share, see also Note 2.A.3. above. B. Intellectual Property Purchase Agreement In the middle of June 2023, the Company achieved the first performance milestone out of the five performance milestones outlined in the Intellectual Property Purchase Agreement (the “Agreement”) executed between the Company and Paul Goode, which is the Company’s Chief Executive Officer (the “Seller”) as October 7, 2022 (the “Closing Date”). As result, the Company is committed to issue 100,000 restricted shares to the Seller. During the periods of three and six months ended June 30, 2023, the Company recorded stock-based compensation expenses amounted to $ 131 thousand 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 30.4 % over a restriction period of 1-year. As of June 30, 2023, achievement of all other performance milestones was not considered probable and thus no stock-based compensation expenses were recorded with respect to thereof. C. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard On May 26, 2023, the Company received a letter from Nasdaq that it no longer complies with Rule 5550(a)(2) of Nasdaq’s Listing Rules (the “Rules”) which require listed securities to maintain a minimum bid price of $ 1 per share. However, the Rules provide the Company a compliance period of 180-days to regain compliance under which if at any time during 180-days period the closing bid price of the Company’s security is at least $ 1 for a minimum of ten consecutive business days, Nasdaq will provide the Company written confirmation of compliance and this matter will be closed. In the event the Company does not regain compliance by the 180th day, the Company may be eligible for additional time to regain compliance or may face delisting. 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. 9