Odysight.ai Inc 10-K for FY2021

Odysight.ai Inc. (ODYS)

10-K 2022-03-30 For: 2021-12-31

Added on April 07, 2026

About this 10-K

Odysight.ai Inc filed this 10-K on March 30, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $387K; down 21.2% from $491K a year earlier
Net loss: $8.99M; compared with a net loss of $4.67M a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

Forward-Looking Statements		3

Part I

Item 1.	Business	4
item 1a.	risk factors	13
Item 1b.	unresolved staff comments	27
Item 2.	properties	27
item 3.	legal proceedings	27
item 4.	mine safety disclosures.	27

PART II

item 5.	market for registrant’s common equity, related stockholder matters and issuer purchases	28
Item 6.	[RESERVED]	30
item 7.	management’s discussion and analysis of financial condition and results of operations	31
item 7a.	quantitative and qualitative disclosures about market risk	36
item 8.	financial statements and supplementary data	36
item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	36
item 9a.	controls and Procedures	37
Item 9b.	Other information	37
Item 9C.	BUSINESS DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	38

PART III

Item 10.	Directors, Executive Officers and corporate governance	38
item 11.	Executive Compensation	42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder matters	45
Item 13.	Certain relationships and related transactions, and director independence	46
Item 14.	Principal accounting fees and services	48

PART IV

Item 15.	exhibits, financial statement schedules	49

SIGNATURES		51

	●	our financial performance, including our history of operating losses;

	●	our ability to obtain additional funding to continue our operations;

	●	our ability to successfully develop and commercialize our products;

	●	changes in the regulatory environments of the United States and other countries in which we intend to operate;

	●	our ability to attract and retain key management and marketing personnel;

	●	competition from new market entrants; and

	●	our ability to identify and pursue development of additional products.

	●	engaging third party companies as territorial representatives in key markets;

	●	initiating business engagements based on leads received through our website, through active web based tools for lead generation, or via other methods or means;

	●	conducting initial technical scopes and discussions together with such prospects in order to evaluate the feasibility of their contemplated projects;

	●	maintaining an updated and detailed website presenting our core competency, solutions, use cases and proven track record;

	●	promoting our website in different search engines and other digital forums through SEO campaigning as well as other proactive digital marketing measures;

	●	employing certain social media platforms for campaigning and advertising;

	●	reconnecting with our large database, which includes a multitude of past prospects;

	●	developing and refining marketing communications materials, including digital and printed brochures; and

	●	participating in major vision technology exhibitions as well as industry specific events.

	(i)	The property rights to information which has been developed belongs to the Medigus Consortium member that developed it. However, the developing entity is obligated to provide the other members in the Medigus Consortium a license for the use of the new information, without consideration, provided that the other members do not transfer such information to any entity which is not a member of the Medigus Consortium. The provision of a license or of the right to use the new information to a third party is subject to approval by the administration of the MAGNET Program at the IIA;
	(ii)	The Medigus Consortium member is entitled to register a patent for the new information which has been developed by it within the framework of its activity in the Medigus Consortium. The foregoing registration does not require approval from the administration of the MAGNET Program at the IIA; and
	(iii)	The know-how and technology developed under the program is subject to the restrictions set forth under the Innovation Law, including restrictions on the transfer of such know-how and any manufacturing rights with respect thereto, without first obtaining the approval of the IIA. Such approval may entail additional payments to the IIA, as determined under the Innovation Law and regulations.

	●	Local Manufacturing Obligation. The terms of the grants under the Innovation Law require that we manufacture the products developed with these grants in Israel. Under the regulations promulgated under the Innovation Law, the products may be manufactured outside Israel by us or by another entity only if prior approval is received from the IIA (such approval is not required for the transfer of less than 10% of the manufacturing capacity in the aggregate, in which case a notice should be provided to the IIA). In general, due to manufacturing outside Israel, with respect to royalties bearing grants we would be required to pay royalties at an increased rate, usually 1% in addition to the standard rate and increased royalties cap (between 120% and 300% of the grants, depending on the manufacturing volume that is performed outside Israel).
	●	Know-How Transfer Limitation. The Innovation Law restricts the ability to transfer, in any manner, know-how funded directly or indirectly by the IIA (sale of products is not prohibited), unless the IIA approves doing so and subject to the terms of the Innovation Law and of the IIA’s approval. Among other things, transfer of IIA funded know-how outside of Israel requires prior approval of IIA and in certain circumstances is subject to certain payments to the IIA, calculated according to a formula provided under the Innovation Law. If we wish to transfer IIA funded know-how outside of Israel, the terms for approval will be determined according to the character of the transaction and the consideration paid to us for such transfer. The IIA approval to transfer know-how created, in whole or in part, in connection with a IIA-funded project to third party outside Israel where the transferring company remains an operating Israeli entity is subject to payment of a redemption fee to the IIA calculated according to a formula provided under the Innovation Law that is based, in general, on the ratio between the aggregate IIA grants to the company’s aggregate investments in the project that was funded by these IIA grants, multiplied by the transaction consideration, considering statutory depreciation and less royalties already paid to the IIA. The transfer of such know-how to a party outside Israel where the transferring company ceases to exist as an Israeli entity is subject to a redemption fee formula that is based, in general, on the ratio between aggregate IIA grants received by the company and the company’s aggregate research and development expenses, multiplied by the transaction consideration considering statutory depreciation and less royalties already paid to the IIA. The regulations promulgated under the Innovation Law establish a maximum payment of the redemption fee paid to the IIA under the above mentioned formulas and differentiates between two situations: (i) in the event that the company transfers its IIA funded know-how, in whole or in part, or is sold as part of an M&A transaction, and subsequently ceases to conduct business in Israel, the maximum redemption fee under the above mentioned formulas will be no more than six times the amount received (plus annual interest) for the applicable know-how being transferred, or the entire amount received from the IIA, as applicable; (ii) in the event that following the transactions described above (e.g. asset sale of IIA funded know-how or transfer as part of an M&A transaction) the company continues to conduct its research and development activity in Israel (for at least three years following such transfer and maintain staff of at least 75% of the number of research and development employees it had for the six months before the know-how was transferred and keeps the same scope of employment for such research and development staff), then the company is eligible for a reduced cap of the redemption fee of no more than three times the amounts received (plus annual interest) for the applicable know-how being transferred. In addition, special rules and payment formulas apply for certain kinds of transfers of know-how outside of Israel, such as R&D licenses. Transfer of IIA-funded know-how outside of Israel not according to the R&D Law may give rise to financial exposure as well as criminal liability.

	●	Approval of the transfer of IIA funded technology to another Israeli company may be granted only if the recipient assumes and abides by the provisions of the Innovation Law and related regulations, including the restrictions on the transfer of know-how and manufacturing rights outside of Israel (in addition, there will be an obligation to pay royalties to the IIA from the income of such sale transaction as part of the royalty payment obligation).

	●	Approval to manufacture products outside of Israel or consent to the transfer of technology, if requested, might not be granted. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits ScoutCam Ltd. to transfer technology or development out of Israel.

	●	We have had a limited operating history and may not be able to successfully operate our business or execute our business plan.
	●	If we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets and third parties to perform these services, we may not be successful in commercializing our products and technology.
	●	We may require substantial additional funding, which may not be available to us on acceptable terms, or at all.
	●	Our failure to effectively manage growth could impair our business.
	●	Our commercial success depends upon the degree of market acceptance by the medical community as well as by other prospective markets and industries.
	●	The COVID-19 pandemic has adversely affected, and may continue to adversely affect, our business, financial condition, liquidity and results of operations.

	●	Our reliance on third-party suppliers for most of the components of our products, including miniature video sensors which are suitable for our CMOS technology products mainly in the medical domain, could harm our ability to meet demand for our products in a timely and cost-effective manner.
	●	We may not be able to manage our strategic partners effectively.
	●	We may not have sufficient manufacturing capabilities to satisfy any growing demand for our commissioned products. We may be unable to control the availability or cost of producing such products.

	●	We expect to face significant competition. If we cannot successfully compete with new or existing technologies or future developed products, our marketing and sales will suffer and we may never be profitable.
	●	Our customers may develop the capabilities of our solution in-house, which would significantly reduce the demand for our products.
	●	Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws could subject us to penalties and other adverse consequences.

	●	Our business and operations would suffer in the event of computer system failures, cyber-attacks, or deficiencies in our cyber-security.
	●	We may be subject to product liability claims, product actions, including product recalls, and other field or regulatory actions that could be expensive, divert management’s attention, and harm our business.
	●	Testing of our technologies potential applications for our products will be required and there is no assurance of regulatory approval.
	●	We rely on highly skilled personnel, and, if we are unable to attract, retain, or motivate qualified personnel, we may not be able to operate our business effectively.
	●	We may be unable to keep pace with changes in technology as our business and market strategy evolves.

	●	Although we have filed an application to list our securities on Nasdaq, there can be no assurance that our securities will be so listed or, if listed, that we will be able to comply with the continued listing standards.
	●	Trading on the OTC Markets is volatile, sporadic and often thin, which could depress the market price of our common stock and make it difficult for our stockholders to resell their common stock.
	●	Nevada law and provisions in our amended and restated articles of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the market price of our common stock.
	●	The market price of our common stock may be highly volatile and such volatility could cause you to lose some or all of your investment.
	●	Because our common stock may be deemed a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.
	●	Compliance with the reporting requirements of federal securities laws can be expensive.
	●	Our investors’ ownership in the Company may be diluted in the future.
	●	Directors, executive officers, principal stockholders, and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our stockholders do not consider to be in their best interests.
	●	We do not anticipate paying any cash dividends in the foreseeable future.

	●	Political, economic and military instability in Israel may impede our ability to operate and harm our financial results.
	●	It may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers.
	●	Exchange rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings.
	●	Certain technology developed and used by us received Israeli government grants for certain research and development activities. The terms of those grants require us to satisfy specified conditions in addition to repayment of the grants upon certain events.
	●	We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.

	●	the absence of a lengthy operating history;

	●	expected continual losses for the foreseeable future;

	●	operating in multiple currencies;

	●	our ability to anticipate and adapt to a developing market(s);

	●	acceptance of our products by the medical and industrial (I4.0) markets (and the non-medical community) and consumers;

	●	limited marketing experience;

	●	limited experience in developing and implementing full platform solutions including AI and cloud;

	●	insufficient capital to fully realize our operating plan;

	●	a competitive environment characterized by well-established and well-capitalized competitors;

	●	the ability to identify, attract and retain qualified personnel; and

	●	operating in an environment that is highly regulated by a number of agencies.

	●	our inability to recruit, train, and retain adequate numbers of effective sales and marketing personnel;

	●	the inability of sales personnel to obtain access to potential customers;

	●	the lack of complementary products to be offered by sales personnel or lack of product-market fit, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

	●	unforeseen costs and expenses associated with creating an independent sales and marketing organization.

	●	the ability of third parties to enter into relationships with us without violating their existing agreements;

	●	the effectiveness of our sales and marketing efforts;

	●	the strength of marketing and distribution support for, and timing of market introduction of, competing technology and products; and

	●	publicity concerning our technology or commissioned products or competing technology and products.

●	misappropriation of our proprietary and confidential information, including technology, will nevertheless occur;

●	our confidentiality agreements will not be honored or may be rendered unenforceable;

●	third parties will independently develop equivalent, superior, or competitive technology or products;

●	disputes will arise with our current or future strategic licensees, customers, or others concerning the ownership, validity, enforceability, use, patentability, or registrability of intellectual property; or

●	unauthorized disclosure of our know-how, trade secrets, or other proprietary or confidential information will occur.

●	adversely affect our reputation with customers;

●	be time-consuming and expensive to evaluate and defend;

●	cause product shipment delays or stoppages;

●	divert management’s attention and resources;

●	subject us to significant liabilities and damages;

●	require us to enter into royalty or licensing agreements; or

●	require us to cease certain activities, including the sale of products.

	●	our board of directors is classified into three classes of directors with staggered three-year terms;
	●	a special meeting of our stockholders may only be called by either our chairman of the board or a majority of our board of directors; and
	●	advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

●	the announcement of new products or product enhancements by us or our competitors;

●	developments concerning intellectual property rights;

●	changes in legal, regulatory, and enforcement frameworks impacting our technology or the application of our technology;

●	variations in our and our competitors’ results of operations;

●	fluctuations in earnings estimates or recommendations by securities analysts, if our common stock is covered by analysts;

●	the results of product liability or intellectual property lawsuits;

●	future issuances of common stock or other securities;
●	the addition or departure of key personnel;

●	announcements by us or our competitors of acquisitions, investments or strategic alliances;

●	current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism or other geopolitical events;

●	sanctions imposed by the United States and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability; and

●	general market conditions and other events or factors, many of which are beyond our control.

	●	completion of R&D and transition to the serial production in connection with a customer-specific project for a Fortune 500 multinational healthcare corporation; and

	●	enlarging its focus on R&D activities in the domain of I4.0 (including PdM and CBM in sectors such as the aviation, energy and automotive). The main effect of this activity was an increase in the number of employees to enable the Company to manage the anticipated increased workload and solution development.

	-	Expanding marketing activities, including the recruitment of VP Business Development for Industry 4.0, and launching a multi-platform digital marketing campaign;
	-	Extensive activity in connection with the Company’s IP, including submissions of new patent applications as well as maintenance, defense, and commercialization efforts of existing patents;
	-	Increased operation expenses in order to improve the current Company’s R&D capabilities;
	-	Increase in research and development activities, including the development of new products and the improvement of existing technology, and the examination of additional applications for our visualization solutions, including in the domains of PdM and CBM, as well as additional industries outside of the medical, defense, and aerospace fields, including sectors such as automotive, industrial non-destructing-testing industries, automotive and energy; and
	-	Investment in capital expenses to provide the necessary facilities, IT, and lab tools for our newly recruited employees and to upgrade the Company’s production and quality control capabilities.

	2021			2020			% Change
Revenues		387,000			491,000			(21	)%
Cost of Revenues		1,108,000			994,000			11	%
Gross Loss		(721,000	)		(503,000	)		43	%
Research and development expenses		2,002,000			725,000			176	%
Sales and marketing expense		908,000			443,000			105	%
General and administrative expenses		5,481,000			3,035,000			81	%
Operating Loss		(9,112,000	)		(4,706,000	)		94	%

	●	an increase of $675,000 in IP expenses due to maintenance, defense, and commercialization efforts of existing patents;
	●	the provision of $229,000 due to a VAT audit by the Israeli Tax Authority;
	●	an increase of $528,000 in share based compensation due to new option grants;
	●	expenses of approx. $206,000 related to our efforts to uplist to Nasdaq;
	●	an increase in in payroll expenses due to the hiring of additional employees, including a new CEO and controller, and a shift in the position of the CFO from part-time to full-time; and
	●	an increase in professional services expenses due to the hiring of a financial consultant, HR consultant, the appointment of new directors and additional hires.

	2021			2020
Cash used in Operating Activities		(5,886,000	)		(4,187,000	)
Cash used in Investing Activities		(11,595,000	)		(276,000	)
Cash provided by Financing Activities		22,559,000			4,506,000

Name	Age	Position
Prof. Benad Goldwasser^†	71	Chairman of the Board
Shmuel Donnerstein^†	69	Director
Ronen Rosenbloom	50	Director
Lior Amit^†	55	Director
Moshe (Mori) Arkin	69	Director
Inbal Kreiss†	55	Director
Zeev Vurembrand^†	70	Director
Yovav Sameah	49	Chief Executive Officer
Tanya Yosef*	39	Chief Financial Officer
Amir Govrin*	55	Chief Technology Officer
Katrin Dlugach*	39	VP of Research and Development
Roee Peled*	43	VP of Business Development
Arik Priel*	47	Chief SW Architect

	a)	any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

	b)	any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

	c)	being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;

	d)	being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

	e)	being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

	f)	being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Name and Principal Position	Year		Base Salary (*)		Bonus			Stock Awards		Option Awards (**)			All Other Compensation		Total
	$ in thousands
Dr. Yaron Silberman,		2021	$	73	$	-		$	-	$	(80	)	$	7	$	-
Former Chief Executive Officer ⁽¹⁾		2020	$	198	$	-		$	-	$	167		$	20	$	385

Yovav Sameah,
Chief Executive Officer ⁽²⁾		2021	$	232	$	50	(***)	$	-	$	616		$	24	$	922

Amir Govrin		2021	$	184	$	-		$	-	$	100		$	22	$	306
Chief Technology Officer ⁽³⁾		2020	$	168	$	-		$	-	$	111		$	21	$	300

Katrin Dlugach,		2021	$	170	$	-		$	-	$	93		$	-	$	263
VP R&D ⁽⁴⁾		2020	$	156	$	-		$	-	$	51		$	-	$	207

	(1)	Consists of Dr. Silberman’s compensation earned in his capacity as the Chief Executive Officer of wholly-owned subsidiary, ScoutCam Ltd. Dr. Silberman did not earn any compensation in his capacity as the Chief Executive Officer of ScoutCam Inc. Dr. Silberman’s employment terminated on March 31, 2021.

	(2)	Consists of Mr. Sameah’s compensation earned in his capacity as the Chief Executive Officer of our wholly-owned subsidiary, ScoutCam Ltd. Mr. Sameah did not earn any compensation in his capacity as the Chief Executive Officer of ScoutCam Inc. Mr. Sameah’s employment commenced on April 15, 2021.

	(3)	Consists of Mr. Govrin’s compensation earned in his capacity as the Chief Technology Officer of our wholly-owned subsidiary, ScoutCam Ltd. Mr. Govrin did not earn any compensation in his capacity as the Chief Technology Officer of ScoutCam Inc.

	(4)	Consists of Ms. Katrin Dlugach compensation earned in his capacity as the VP R&D of our wholly-owned subsidiary, ScoutCam Ltd. Ms. Dlugach did not earn any compensation in her capacity as the VP R&D of ScoutCam Inc.

	(*)	Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each named executive officer’s scope of responsibility and accountability. Base salary amounts include management insurance (which includes pension, disability insurance and severance pay), payments towards such employee’s education fund, Israeli social security and amounts paid for use of a Company car. Each named executive officer also receives gross-up payments for the taxes on these benefits.

Name and Position	No. of Securities Underlying Unexercised Options (#) Exercisable		No. of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Vesting Schedule	Option Expiration Date
Dr. Yaron Silberman,		37,011		-		2.61	(*)	March 31, 2022
Former Chief Executive Officer

Yovav Sameah,
Chief Executive Officer		-		200,985		3.6	(**)	April 15, 2028

Amir Govrin		40,712		18,506		2.61	(*)	February 12, 2027
Chief Technology Officer		-		26,112		4.50	(**)	May 13, 2028

Katrin Dlugach		16,655		12,954		2.61	(*)	February 12, 2027
VP R&D		-		26,112		4.50	(**)	May 13, 2028

Name	Fees Earned or Paid in Cash		Stock Awards		Option Awards (*)		All Other Compensation		Total
	$ in thousands
Prof. Benad Goldwasser	$	120	$	-	$	418	$	-	$	538
Shmuel Donnerstein	$	16	$	-	$	69	$	-	$	85
Ronen Rosenbloom	$	16	$	-	$	30	$	-	$	46
Lior Amit	$	16	$	-	$	79	$	-	$	95
Moshe (Mori) Arkin ⁽¹⁾	$	14	$	-	$	83	$	-	$	97
Inbal Kreiss ⁽²⁾	$	12	$	-	$	55	$	-	$	67
Zeev Vurembrand⁽³⁾	$	10	$	-	$	33	$	-	$	43

(1)	Appointed as a director of ScoutCam Inc. on February 15, 2021.
(2)	Appointed as a director of ScoutCam Inc. on April 9, 2021.
(3)	Appointed as a director of ScoutCam Inc. on May 13, 2021.
(*)	Represents the equity-based compensation expenses recorded in the Company’s consolidated financial statements for the year ended December 31, 2021, based on the option’s fair value, calculated in accordance with accounting guidance for equity-based compensation.