Glucotrack, Inc. 10-Q

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, 2024. 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 continuous blood glucose monitor (“CBGM”), the Glucotrack CBGM, for those with Type 1 diabetes and insulin-dependent Type 2 diabetes. The Glucotrack CBGM is being developed 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 the sensor chemistry following the successful in-vitro feasibility study demonstrating that a minimum two-year implant life is highly probable with the current sensor design. Recently we announced that a 3-year longevity is feasible leveraging both in-vitro and in-silico test results. We have also completed multiple animal studies with initial prototype systems which demonstrated a simple implant procedure with good safety and functionality. The results of both were presented in poster form at the 2024 American Diabetes Association annual conference. Further to the above progress on the Glucotrack CBGM, we have also successfully demonstrated continuous glucose sensing in the epidural space. This latter approach is of importance for patients with diabetes already contemplating spinal cord stimulation therapy for their condition. A regulatory submission has been made for a first in human study outside of the United States. This will be an acute study intended to demonstrate device performance and safety. All preparatory clinical activities and applicable regulatory approvals are complete. In parallel, we are also preparing for a long-term clinical trial outside the United States that is expected to begin in the second quarter of 2025. 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. 14 Recent Events 2025 Reverse Stock Split and Increase in Authorized Common Stock We filed with the Delaware Secretary of State a Certificate of Amendment to its Certificate of Incorporation which became effective at 4:30 p.m. on February 3, 2025, to implement a reverse stock split at a ratio of 1-for-20 (the “2025 Reverse Stock Split”) of the shares of our Common Stock. The 2025 Reverse Stock Split was approved by our stockholders at the special meeting of stockholders held on January 3, 2025 (the “Special Meeting”). All shares and per share numbers in the consolidated financial statements have been retroactively adjusted and are reflected on a post-reverse share split basis. On January 3, 2025, we filed an amendment to our Certificate of Incorporation, as to increase the Company’s authorized shares of Common Stock from 100,000,000 to 250,000,000. On February 3, 2025, the stockholders approved at the Special Meeting the increase in our authorized shares of Common Stock from 100,000,000 to 250,000,000, as well as the full issuance of shares of Common Stock issuable by us upon the exercise of Series A Warrants and Series B Warrants (defined herein). ATM Sales Agreement On December 17, 2024, we entered into an ATM sales agreement (the “Sales Agreement”) with Dawson James Securities, Inc. (“Dawson James”), pursuant to which we have agreed to issue and sell shares of Common Stock, having an aggregate offering price of up to $8.23 million, from time to time, through an “at-the-market” equity offering program under which Dawson James will act as sales agent (the “Agent”). On March 21, 2025, we sold 12,377,967 shares of Common Stock at an average offering price of $0.304 per share pursuant to the Sales Agreement. for net proceeds of $3.6 million, after deducting fees owed to the Agent from such sale. The shares of Common Stock were offered by us pursuant to a prospectus supplement dated December 17, 2024, and accompanying prospectus dated October 3, 2024, which forms a part of our registration statement on Form S-3 (Registration No. 333-282297) (the “S-3 Registration Statement”), which was declared effective by the Securities and Exchange Commission, on October 3, 2024. Registered Direct Offering On February 4, 2025, we entered into a securities purchase agreement with certain institutional investors, relating to the registered direct offering and sale of an aggregate of 2,638,042 shares of Common Stock at an offering price of $1.15 per share. The net proceeds to us from the offering were approximately $2.7 million, after deducting fees owed to placement agent and other offering expenses. The February 2025 offering closed on February 5, 2025. The shares of Common Stock from the February 2025 registered direct offering was offered by us pursuant to a prospectus supplement dated February 4, 2025, and accompanying prospectus dated October 3, 2024, which forms a part of our S-3 Registration Statement. Dawson James acted as the placement agent for the offerings pursuant to a placement agency agreement, dated February 4, 2025, by and between us and Dawson James. Warrant Exchange Beginning on January 6, 2025, through March 15, 2025, we received exchange notices from certain holders of the Series B Warrants, with respect to an aggregate of 3,241,240 of the Series B Warrants, requiring the delivery of 9,723,724 shares of Common Stock according to the alternative cashless exercise, as applicable to the Series B Warrants under the November 2024 registered direct offering. The remaining 646 Series B Warrants are exchangeable for an aggregate of approximately 1,940 shares of Common Stock (subject to adjustment in the event of any stock dividend and split, reverse stock split, recapitalization, reorganization or similar transaction). Appointment of Peter C. Wulff as Chief Financial Officer Mr. Cardwell’s resigned as Chief Financial Officer of the Company, and on January 28, 2025, our board of directors (the “Board”) appointed Peter C. Wulff as Chief Financial Officer of the Company. 15 Financial Overview Operating Expenses General and Administrative General and administrative expenses consist primarily of professional services, salaries, 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. Research and Development Research and development expenses consist primarily of salaries and other personnel-related expenses, including stock-based compensation expenses, materials, travel expenses, clinical trials and other expenses. We expect research and development expenses to increase in 2025 and beyond, primarily due to expanding clinical trial activities, hiring additional personnel, as well the development of 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, development of new Glucotrack CBGM models and other product candidates. Selling and Marketing Selling and marketing expenses consist primarily of personnel-related expenses and professional service costs. Other (Income) Expense Other income expense, consist primarily of the change in fair value of derivative liabilities, finance (income) expense and other (income) expense. Results of Operations The following discussion of our operating results explains material changes in our results of operations for the three-months ended March 31, 2024 compared with the same periods ended March 31, 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 March 31, 2025 and 2024 General and administrative expenses General and administrative expenses were approximately $1,499 for the three-month period ended March 31, 2025, as compared to approximately $733, for the prior-year period. The increase is primarily attributable to increased legal and professional fees, personnel costs and placement agent fees. Research and development expenses Research and development expenses were approximately $1,871 for the three-month period ended March 31, 2025, as compared to approximately $2,148 for the prior-year period. The decrease is attributable to a reduction in product and manufacturing fees we accrued during the period related to the development of the Glucotrack CBGM model. Selling and marketing expenses Selling and marketing expenses were approximately $128 for the three-month period ended March 31, 2025, as compared to $70 for the prior-year period. This increase is primarily attributable to increased professional marketing services. Change in Derivative Liability Change in derivative liability for the three months ended March 31, 2025, was an increase of $3,376. The change is primarily due to adjustments of the estimated fair value of the Series A Warrants, and the settlement of Series B Warrants exercised during the current quarter. See Note 3B to the condensed consolidated financial statements. Financing income (expenses), net Financing income, net was approximately $37 for the three-month period ended March 31, 2025, as compared to financing income of approximately $24 for the prior-year period. The increase is attributable to interest income received during the period. Net Loss Net loss was approximately $6,833 million for the three-months’ period ended March 31, 2025, as compared to approximately $2,927 million for the prior-year period. The increase in net loss is primarily attributed to the increase in general and administrative expenses and the fair value change of the derivative liability, as described above. 16 Liquidity and Capital Resources As of March 31, 2025, we had $9,100 in cash and cash equivalents compared with $5,617 in cash and cash equivalents as of December 31, 2024. The net increase in cash and cash equivalents was attributable to the $6,395 received from financing activities offset by cash used in operating and investing activities of $2,928. We have a history of recurring losses, and as of March 31, 2025, we have an accumulated deficit of $139,283. During the three months ended March 31, 2025, we recorded a net loss of $6,833. Our primary requirements for liquidity have been to fund product and clinical development activities and to satisfy our general corporate and working capital needs. Subsequent to March 31, 2025, we sold 3,056,956 shares of Common Stock through the ATM Sales Agreement at an average offering price of $0.183 per share for net proceeds of $543, after deducting fees owed to the Agent from such sale. Based on our operating plans, we do not expect that our current cash and cash equivalents as of March 31, 2025, will be sufficient to fund our operating, investing, and financing cash flow needs for at least the next twelve months, assuming our programs advance as currently contemplated. The Company estimates it will require approximately $15.0 million in cash to fund operations over this period. Based upon this review and our current financial condition, the Company has concluded that substantial doubt exists as to our ability to continue as a going concern. We have raised and believe we will continue to be able to raise additional capital through debt financing, private or public equity financings, license agreements, collaborative agreements or other arrangements with other companies, or other sources of financing. However, there can be no assurances that such financing will be available or will be at terms acceptable to us, or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our clinical trials or other operations. If any of these events occur, our ability to achieve our operational goals would be adversely affected. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “ Risk Factors .” Depending on the severity and direct impact of these factors on us, we may be unable to secure additional financing to meet our operating requirements on commercially acceptable terms favorable to us, or at all. Going Concern Uncertainty To date, we have not yet commercialized the Glucotrack CBGM. Further development and commercialization efforts are expected to require substantial additional expenditure. Therefore, we are dependent upon external sources for financing our operations. As of March 31, 2025, we have incurred an accumulated deficit of $139,283. In addition, we have generated operating losses and negative operating cash flow for all reported periods. As of March 31, 2025, the balance of cash and cash equivalents amounted to $9,100. During the three months ended March 31, 2025, we received approximately $6,396 through public offerings. In addition, subsequent to the balance sheet date, we received $261 through the sale of shares of Common Stock. We plan to finance our operations through the sale of debt or equity securities (including the S-3 Registration Statement). There can be no assurance that we will succeed in obtaining the necessary financing or generating sufficient revenue from sale of the Glucotrack CBGM in order to continue our operations as a going concern. 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. 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 Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025. 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. Off Balance Sheet Arrangements We do not have any off balance sheet agreements. Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, we are not required to provide the information required by this Item. 17