ODYS 10-Q
Odysight.ai Inc. (ODYS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| N/A | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 14, 2024, the registrant had shares of common stock, par value $ of the registrant issued and outstanding.
As used in this Quarterly Report and unless otherwise indicated, the terms “Odysight.ai (formerly known as ScoutCam Inc.),” “we,” “us,” “our,” or “our Company” refer to Odysight.ai. Unless otherwise specified, all dollar amounts are expressed in United States dollars.
ODYSIGHT.AI INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| Page | ||
| Cautionary Note Regarding Forward-Looking Statements | 3 | |
| PART 1-FINANCIAL INFORMATION | ||
| Item 1. | Consolidated Financial Statements (unaudited) | 4 |
| Consolidated Balance Sheets | 5 | |
| Consolidated Statements of Comprehensive Loss | 7 | |
| Statements of Stockholders’ Equity | 8 | |
| Consolidated Statements of Cash Flows | 10 | |
| Notes to Consolidated Financial Statements | 12 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 25 |
| Item 4. | Control and Procedures | 25 |
| PART II-OTHER INFORMATION | 25 | |
| Item 1. | Legal proceedings | 25 |
| Item 1A. | Risk Factors | 25 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 25 |
| Item 3. | Defaults Upon Senior Securities | 25 |
| Item 4. | Mine Safety Disclosures | 25 |
| Item 5. | Other information | 25 |
| Item 6. | Exhibits | 26 |
| SIGNATURES | 27 | |
| -2- |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events.
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended December 31, 2023 (filed on March 26, 2024) entitled “Risk Factors” as well as in our other public filings.
In light of these risks and uncertainties, and especially given the start-up nature of our business, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
| -3- |
Item 1. Financial Statements
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2024
CONSOLIDATED ODYSIGHT.AI INC.
| Page | |
| Interim Condensed Consolidated Financial Statements - in US Dollars (USD) in thousands | |
| Interim Condensed Consolidated Balance Sheets (unaudited) | 5 |
| Interim Condensed Consolidated Statements of Operations (unaudited) | 7 |
| Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) | 8 |
| Interim Condensed Consolidated Statements of Cash Flows (unaudited) | 10 |
| Notes to the Interim Condensed Consolidated Financial Statements | 12 |
| -4- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | |||||||
| Unaudited | Audited | |||||||
| USD in thousands | ||||||||
| Assets | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Short terms deposits | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS: | ||||||||
| Contract fulfillment assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Severance pay asset | ||||||||
| Other non-current assets | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | ||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| -5- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
| September 30, 2024 | December 31, 2023 | |||||||
| Unaudited | Audited | |||||||
| USD in thousands | ||||||||
| Liabilities and shareholders’ equity | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | ||||||||
| Contract liabilities - short term | ||||||||
| Operating lease liabilities - short term | ||||||||
| Accrued compensation expenses | ||||||||
| Related parties | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Contract liabilities - long term | ||||||||
| Operating lease liabilities - long term | ||||||||
| Liability for severance pay | ||||||||
| Other non-current liabilities | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||
| Common stock, $ par value; shares authorized as of September 30, 2024, and December 31, 2023, and shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| -6- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Unaudited | ||||||||||||||||
| USD in thousands | ||||||||||||||||
| REVENUES | ||||||||||||||||
| COST OF REVENUES | ||||||||||||||||
| GROSS PROFIT (LOSS) | ( | ) | ( | ) | ||||||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | ||||||||||||||||
| SALES AND MARKETING EXPENSES | ||||||||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||||
| OPERATING LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME | ||||||||||||||||
| FINANCING INCOME, NET | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss per ordinary share (basic and diluted, USD) | ) | ) | ) | ) | ||||||||||||
| Weighted average ordinary shares (basic and diluted, in thousands) | ||||||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| -7- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Nine Months Ended September 30, 2024 (Unaudited)
| Common Stock | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Number | Amount | capital | deficit | equity | ||||||||||||||||
| In thousands | USD in thousands | |||||||||||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Issuance of shares upon RSU vesting | * | (*) | ||||||||||||||||||
| Issuance of shares | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
Three Months Ended September 30, 2024 (Unaudited)
| Common Stock | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Number | Amount | capital | deficit | equity | ||||||||||||||||
| In thousands | USD in thousands | |||||||||||||||||||
| Balance as of July 1, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Issuance of shares upon RSU vesting | * | (*) | ||||||||||||||||||
| Issuance of shares | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| * |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| -8- |
Nine Months Ended September 30, 2023 (Unaudited)
| Additional | Total | |||||||||||||||||||
| Common Stock | paid-in | Accumulated | Shareholders’ | |||||||||||||||||
| Number | Amount | capital | deficit | equity | ||||||||||||||||
| In thousands | USD in thousands | |||||||||||||||||||
| Balance as January 1, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Issuance of shares upon RSU vesting | * | * | ||||||||||||||||||
| Issuance of shares and warrants | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as September 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
Three Months Ended September 30, 2023 (Unaudited)
| Additional | Total | |||||||||||||||||||
| Ordinary shares | paid-in | Accumulated | Shareholders’ | |||||||||||||||||
| Number | Amount | capital | deficit | Equity | ||||||||||||||||
| In thousands | USD in thousands | |||||||||||||||||||
| Balance as July 1, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Issuance of shares upon RSU vesting | * | * | ||||||||||||||||||
| Issuance expenses | - | ( | ) | ( | ) | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as September 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| * |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| -9- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Unaudited | ||||||||||||||||
| USD in thousands | ||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Stock based compensation | ||||||||||||||||
| Severance pay asset and liability | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest and exchange differences from operating lease liability | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss (Profit) from exchange differences on cash and cash equivalents | ( | ) | ||||||||||||||
| Interest income in respect of deposits | ( | ) | ||||||||||||||
| Changes in operating assets and liability items: | ||||||||||||||||
| Decrease (increase) in accounts receivable | ( | ) | ||||||||||||||
| Decrease (increase) in inventory | ( | ) | ( | ) | ||||||||||||
| Decrease in operating lease liability | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Decrease in right-of-use asset | ||||||||||||||||
| Decrease (increase)in other current and non-current assets | ( | ) | ( | ) | ||||||||||||
| Increase (decrease) in accounts payable | ( | ) | ( | ) | ||||||||||||
| Increase (decrease) in related parties | ( | ) | ||||||||||||||
| Decrease in contract fulfillment assets | ||||||||||||||||
| Decrease in current and non-current contract liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Increase in accrued compensation expenses | ||||||||||||||||
| Increase (decrease) in other current and non-current liabilities | ( | ) | ||||||||||||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Withdrawal of short terms deposits | ||||||||||||||||
| Investment in short term deposits | ( | ) | ||||||||||||||
| Net cash flows provided by (used in) investing activities | ( | ) | ( | ) | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
| Proceeds from issuance of shares and warrants | ( | ) | ||||||||||||||
| Net cash flows provided by (used in) financing activities | ( | ) | ||||||||||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | ||||||||||||||||
| BALANCE OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF THE PERIOD | ||||||||||||||||
| LOSS (PROFIT) FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ( | ) | ( | ) | ||||||||||
| BALANCE OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD | ||||||||||||||||
| -10- |
Non-cash activities -
Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Unaudited | ||||||||||||||||
| USD in thousands | ||||||||||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | ||||||||||||||||
| Termination of right-of-use assets in exchange for cancellation of operating lease obligations | ( | ) | ( | ) | ( | ) | ||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| -11- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – GENERAL:
| a. | Odysight.ai Inc (the “Company”), formerly known as ScoutCam Inc., was incorporated under the laws of the State of Nevada on March 22, 2013.
The Company’s wholly owned subsidiary, Odysight.ai Ltd (“Odysight.ai”), formerly known as ScoutCam Ltd., was incorporated in the State of Israel on January 3, 2019, and was merged into the Company on December 31, 2019, in a share exchange transaction, following which the surviving operations of the merged entity were the operations of Odysight.ai.
On February 28, 2024, D. VIEW Ltd., a wholly owned subsidiary of the Company, was incorporated in the State of Israel to act as a local representative for the defense market in Israel.
The Company, through its subsidiaries, provides image-based platform solutions for the Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) markets with its visualization and AI platform. The Company’s video sensor-based platform provides solutions for critical systems in the aviation, transportation, and energy industries. Its video-based sensors, embedded software, and AI algorithms are deployed in hard-to-reach locations and harsh environments across a variety of PdM and CBM use cases and allow maintenance and operations teams visibility into areas which are inaccessible under normal operation, or where the operating ambience is not suitable for continuous real-time monitoring. Some of the Company’s products utilize micro visualization technology in medical devices for minimally invasive medical procedures. |
| -12- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – GENERAL (continued):
| b. | Since
the incorporation of Odysight.ai and through September 30, 2024, the Company accumulated a deficit of approximately $ |
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
a. Unaudited Interim Financial Statements
The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
b. Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.
c. Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, inventory impairment and stock-based compensation, as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates.
| -13- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued):
d. Significant Accounting Policies
The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements. With the commencement of development and customization contracts during the nine-month period ended September 30, 2024, in which the performance obligation is satisfied over time, the Company measures the progress of the activities using the input method, based on the effort expended relative to the estimated total effort to satisfy the performance obligation.
e. Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Group’s condensed consolidated financial statements.
NOTE 3 – LEASES:
| a. | Omer office space |
In
December 2020,
On
June 25, 2023, Odysight.ai entered into an amendment to these agreements, pursuant to which the lease for the Additional Space will be
shortened and end on June 30, 2023, and
Monthly
lease payments under the agreement for the Original Space are approximately $
| b. | Ramat Gan office space |
In
May 2023,
Odysight.ai
subleases part of the office space in Ramat Gan to a third party for approximately $
| c. | The Company leases vehicles under various operating lease agreements. |
Supplemental cash flow information related to operating leases was as follows:
Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Unaudited | ||||||||||||||||
| USD in thousands | ||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||
| Operating cash flows from operating leases | ||||||||||||||||
As
of September 30, 2024, the Company’s operating leases had a weighted average remaining lease term of
The maturities of lease liabilities under operating leases as of September 30, 2024, are as follows:
| Operating leases | ||||
| USD in thousands | ||||
| Remainder of 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total future lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total lease liability balance | ||||
| -14- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – OTHER CURRENT LIABILITIES:
Other current liabilities consisted of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Accrued expenses | ||||||||
| Other current liabilities | ||||||||
NOTE 5 – EQUITY:
| a. | Private Placement |
| 1. | On
March 29, 2021, the Company issued to certain investors, including Moshe (Mori) Arkin, a major stockholder and director of the
Company, an aggregate of
units in exchange for an aggregate purchase price of $ |
| 2. | On
March 16, 2023, the Company entered into stock purchase agreements for a private placement with (i) Moshe (Mori) Arkin and (ii) The Phoenix
Insurance Company Ltd. (“Phoenix Insurance”) and Shotfut Menayot Israel – Phoenix Amitim (“Phoenix Amitim”),
in connection with the sale and issuance of an aggregate of units, at a purchase price of $per unit, and for an aggregate purchase price
of $ |
| 3. | On
July 16, 2024, the Company issued shares of its common stock in consideration for a purchase price of $ per share to new
and existing investors, including Moshe (Mori) Arkin and The Phoenix Holdings,
through Phoenix Insurance and Phoenix Amitim (the “2024 Private Placement”). The Company raised approximately $ |
Warrants:
As of September 30, 2024, the Company had the following outstanding warrants to purchase common stock:
| Exercise Price | Number of | |||||||||||
| Issuance | Expiration | Per Share | Underlying | |||||||||
| Warrant | Date | Date | ($) | Common Stocks | ||||||||
| March 2021 Warrants | ||||||||||||
| March 2023 Warrants | ||||||||||||
| -15- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – EQUITY (continued):
| b. | Stock-based compensation to employees, directors and service providers: |
In February 2020, the Company’s Board of Directors approved the 2020 Share Incentive Plan (the “2020 Plan”).
The 2020 Plan initially included a pool of shares of common stock for grant to Company employees, consultants, directors and other service providers. On March 15, 2020, the Company’s Board of Directors approved an increase to the 2020 Plan’s option pool by an additional shares of common stock. On June 22, 2020, the Company’s Board of Directors approved an increase to the 2020 Plan’s option pool by an additional shares of common stock. During the second quarter of 2021, the Company’s Board of Directors approved an increase to the 2020 Plan’s option pool by an additional shares of common stock. During the first quarter of 2023, the Company’s Board of Directors approved an increase to the 2020 Plan’s option pool by an additional shares of common stock.
In June 2024, the Company’s Board of Directors approved the 2024 Share Incentive Plan (the “2024 Plan”).
The 2024 Plan initially included a pool of shares of common stock, representing the number of shares remaining available for grant under the 2020 Plan. These shares are available for future grant to Company employees, consultants, directors and other service providers. Shares that were subject to awards granted under either the 2020 Plan or the 2024 Plan that have expired or were cancelled or become un-exercisable for any reason without having been exercised in full shall become available for future grant under the 2024 Plan.
In July, 2024, the Company’s Board of Directors approved an increase to the 2024 Plan’s option pool by an additional shares of common stock.
The 2020 Plan and 2024 Plan each provide for the grant of stock options (including incentive stock options and nonqualified stock options), shares of common stock, restricted shares, restricted share units, and other share-based awards.
Stock option activity:
During nine months ended September 30, 2024, the Company granted options pursuant to the 2020 Plan and options pursuant to the 2024 Plan.
| Nine months ended | ||||
| September 30, 2024 | ||||
| Underlying value of ordinary shares ($) | - | |||
| Exercise price ($) | - | |||
| Expected volatility (%) | % | |||
| Term of the options (years) | ||||
| Risk-free interest rate | %- | % | ||
The cost of the benefit embodied in the options granted during the nine months ended September 30, 2024, based on their fair value as of the grant date, is estimated to be approximately $ thousand. These amounts will be recognized in the statements of operations and comprehensive income over the vesting period.
| For the | ||||||||
| Nine months ended | ||||||||
| September 30, 2024 | ||||||||
| Weighted | ||||||||
| average | ||||||||
| Number of | exercise | |||||||
| Options | price | |||||||
| $ | ||||||||
| Outstanding at beginning of period | ||||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding at end of period | ||||||||
| Vested at end of period | ||||||||
| -16- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – EQUITY (continued):
Restricted stock unit (“RSU”) activity
The Company from time to time has granted RSUs to its employees and service provider pursuant to the 2020 Plan.
Each RSU will vest based on continued service which is generally over three years. The grant date fair value of the award will be recognized as stock-based compensation expense over the requisite service period. The fair value of restricted stock units was estimated on the date of grant based on the fair value of the Company’s common stock.
| For the | ||||||||
| Nine months ended | ||||||||
| September 30, 2024 | ||||||||
| Weighted Average | ||||||||
| Number of | Grant Date Fair Value | |||||||
| RSUs | per Share | |||||||
| $ | ||||||||
| Outstanding at beginning of period | ||||||||
| Granted | ||||||||
| Forfeited | ||||||||
| Vested | ( | ) | ||||||
| Unvested and Outstanding at end of period | ||||||||
Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Unaudited | ||||||||||||||||
| USD in thousands | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total expenses | ||||||||||||||||
| -17- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – REVENUES:
| Disaggregation of revenue |
| Nine months ended | Three months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| USD in thousands | USD in thousands | |||||||||||||||
| Development Services (*) | ||||||||||||||||
| Products | ||||||||||||||||
| Total Revenues | ||||||||||||||||
| (*) | During
the second quarter of 2022, the Company completed the development of a customer-specific
project for a Fortune 500 multinational healthcare corporation and moved from the development
phase of the project to its production phase. As a result, during the nine months ended September
30, 2024, the Company recognized development services revenues in the amount of $
In
addition, the Company recognized product revenues of $
During the nine months ended September 30, 2024 the Company recognized development
services revenues in the amount of $ |
Contract fulfillment assets and Contract liabilities:
The Company’s contract fulfillment assets and contract liabilities as of September 30, 2024, and December 31, 2023, were as follows:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Contract fulfillment assets | ||||||||
| Contract liabilities | ||||||||
Contract liabilities include deferred service and advance payments.
The change in contract fulfillment assets:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Balance at beginning of the period | ||||||||
| Contract costs deferred during the period | ||||||||
| Contract costs recognized during the period | ( | ) | ( | ) | ||||
| Balance at end of the period | ||||||||
The change in contract liabilities:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Balance at beginning of the period | ||||||||
| Revenue deferred during the period | ||||||||
| Revenue recognized during the period | ( | ) | ( | ) | ||||
| Balance at end of the period | ||||||||
Remaining Performance Obligations
Remaining
Performance Obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue
and amounts that are expected to be invoiced and recognized as revenue in future periods. As of September 30, 2024, the total RPO amounted
to approximately $
| -18- |
ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - INVENTORY:
Composed as follows:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Raw materials and supplies | ||||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
During
the period ended September 30, 2024,
Basic loss per share is computed by dividing the net loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares as described below.
In computing the Company’s diluted loss per share, the numerator used in the basic loss per share computation is adjusted for the dilutive effect, if any, of the Company’s potential shares of common stock. The denominator for diluted loss per share is a computation of the weighted-average number of ordinary shares and the potential dilutive ordinary shares outstanding during the period.
NOTE 9 – RELATED PARTIES
| a. | Balances with related parties: |
| September 30, 2024 | December 31, 2023 | |||||||
| USD in thousands | ||||||||
| Directors (directors’ accrued compensation) | ||||||||
| Smartec R&D Ltd. (see b below) | ||||||||
| b. | During nine months ended September 30, 2023, the Company received development services from Smartec R&D Ltd., a company owned by the Company’s former CTO. |
Total
compensation paid to Smartec R&E Ltd. during the nine months ended September 30, 2023, was approximately $
NOTE 10 - COMMITMENTS AND CONTINGENCIES
On
April 2023, the Company received approval from the Israel Innovation Authority (previously the Office of the Chief Scientist) (the
“IIA”) to support and enhance the Company’s production line and capabilities in the next 24 months until April
2025.
NOTE 11 – SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. The Company identified no subsequent events as of the date that the financial statements were issued.
| -19- |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements”. You should review the “Risk Factors” section of our Annual Report for the fiscal year ended December 31, 2023, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless otherwise designated, the terms “we,” “us,” “our,” “Odysight.ai,” “the Company,” and “our Company” refer to Odysight.ai Inc. and our wholly-owned subsidiaries, including Odysight.ai Ltd., a private company organized under the laws of the State of Israel.
Overview
Our primary business activity in prior quarters was enlarging our focus on R&D activities in the domain of PdM and CBM (we refer to these applications as Industry 4.0, or I4.0), including in sectors such as aerospace, maritime energy and other heavy machinery, engines and complicated mechanics which require ongoing monitoring and predictive maintenance applications. The main effect of this activity was to enable the Company to accelerate its growth and support an increased workload and solution development requirements from customers.
Comparison of the nine months ended September 30, 2024 and 2023
The following table summarizes our results of operations for the nine months period ended September 30, 2024 and 2023, together with the changes in those items in dollars and as a percentage:
| Nine months ended September 30, | ||||||||||||
| 2024 | 2023 | % Change | ||||||||||
| Revenues | 2,660,000 | 1,087,000 | 145 | % | ||||||||
| Cost of Revenues | 1,964,000 | 1,648,000 | 19 | % | ||||||||
| Gross Profit (Loss) | 696,000 | (561,000 | ) | |||||||||
| Research and development expenses | 4,705,000 | 4,107,000 | 15 | % | ||||||||
| Sales and marketing expense | 806,000 | 877,000 | (8 | )% | ||||||||
| General and administrative expenses | 3,929,000 | 3,225,000 | 22 | % | ||||||||
| Operating Loss | (8,744,000 | ) | (8,770,000 | ) | - | |||||||
Revenues
For the nine months ended September 30, 2024, we generated revenues of $2,660,000, an increase of $1,573,000, or 145 %, compared to revenues of $1,087,000 for the nine months ended September 30, 2023.
The increase in revenues was primarily attributable to an increase in revenues from a Fortune 500 multinational healthcare corporation, as well as recognition of revenues from Industry 4.0.
The increase in revenues from a Fortune 500 multinational healthcare corporation (see note 6 to our interim financial statements) was mainly due to:
| - | an increase in the number of units sold and supplied to the customer during the nine months ended September 30, 2024, and | |
| - | formalization of negotiations with the customer, following which the sale price per unit increased significantly compared to the previous sale price. |
A substantial portion of our current revenue comes from a limited number of customers.
Cost of Revenues
Cost of revenue is primarily comprised of cost of personnel and certain allocated expenses related to facilities, logistics and quality control.
Cost of revenues for the nine months ended September 30, 2024 was $1,964,000, an increase of $316,000, or 19%, compared to cost of revenues of $1,648,000 for the nine months ended September 30, 2023.
The increase in cost of revenues was primarily due to an increase in revenues.
Gross Profit (Loss)
Gross profit for the nine months ended September 30, 2024, was $696,000. Gross loss for the nine months ended September 30, 2023, was $561,000.
The change was due to both an increase in revenues and an increase in cost of revenues, as described above.
The transition from a gross loss to a gross profit was principally attributable to:
| - | formalization of negotiations with the Fortune 500 multinational healthcare corporation, following which the unit price experienced a substantial increase compared to its previous level; and | |
| - | an increase in the number of units sold and supplied to the customer during the nine months ended September 30, 2024. |
Research and Development Expenses
Research and development efforts are focused on new product development, as well as developing and enhancing functionality for our existing products. These expenses primarily consist of employee-related expenses, including salaries, benefits, and stock-based compensation expense for personnel engaged in research and development functions, consulting, and professional fees related to research and development activities, prototype materials, facility costs, and other allocated expenses, including costs related to rent and maintenance of our facilities, utilities, depreciation, and other supplies. We expense research and development costs as incurred.
Research and development expenses for the nine months ended September 30, 2024 were $4,705,000, an increase of $598,000, or 15%, compared to $4,107,000 for the nine months ended September 30, 2023.
The increase in research and development expenses was mainly due to an increase in payroll and related expenses for new employee recruitment but also attributable in part to:
| - | an increase in stock-based compensation due to new options grants; | |
| - | procuring materials and employment of subcontractors for Industry 4.0 projects; and | |
| - | development of new products. |
We expect that our research and development expenses will increase as we continue to develop and improve our products and services in the I4.0 domain.
| -20- |
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of payroll and related expenses, consulting services, promotional materials, exhibitions, demonstration equipment, and certain allocated facility infrastructure costs.
Sales and marketing expenses for the nine months ended September 30, 2024 were $806,000, a decrease of $71,000, or 8%, compared to $877,000 for the nine months ended September 30, 2023.
The decrease in sales and marketing expenses was mainly due to one-time expenses incurred during the nine months ended September 30, 2023 which did not reoccur during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, we incurred significant expenses related to rebranding activities. These activities included costs associated, inter alia, with altering our name, design of a new logo, and the creation of new promotional materials.
We expect that our sales and marketing expenses will increase as we expand our commercial activity in the I4.0 domain.
General and Administrative Expenses
General and administrative expenses primarily consist of payroll and other related costs, including stock-based compensation. General and administrative expenses also include direct and allocated cost, such as facility-related costs, professional fees, legal, patent, investors and public relations, accounting, auditing, tax services, and insurance costs.
General and administrative expenses for the nine months ended September 30, 2024, were $3,929, 000, an increase of $704,000, or 22%, compared to $3,225,000 for the nine months ended September 30, 2023.
The increase in general and administrative expenses was primarily due to:
| - | an increase in professional services expenses due to the hiring of a financial consultant, IR consultant, HR consultant, and the appointment of new directors; |
| - | an increase in payroll and related expenses due to cash compensation bonuses paid to existing employees, including the CEO, CFO, and Senior VP of Product Portfolio; and |
| - | an increase in stock-based compensation due to new options grants. |
Operating loss
We incurred an operating loss of $8,744,000 for the nine months ended September 30, 2024, a decrease of $26,000, or 0.3%, compared to operating loss of $8,770,000 for the nine months ended September 30, 2023.
The decrease in operating loss was primarily due to an increase in gross profit and a decrease in sales and marketing expenses, partially offset by increase in expenses related to research and development and general and administrative expenses, each as described above.
Cash Flows
The following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):
| Nine month ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash used in Operating Activity | (5,522,000 | ) | (7,338,000 | ) | ||||
| Cash provided by (used in) Investing Activity | 7,962,000 | (594,000 | ) | |||||
| Cash provided by Financing Activity | 9,850,000 | 13,835,000 | ||||||
Operating Activities
Our primary uses of cash from operating activities have been for payroll expenses, research and development costs, manufacturing costs, marketing and promotional expenses, professional services costs, and costs related to our facilities. We expect that cash flows related to our operating activities will continue to increase as our business and our working capital requirements grow.
During the nine months ended September 30, 2024, cash used in operating activities was $5.5 million, consisting of net loss of $8.2 million, partially offset by a favorable net change in operating assets and liabilities of $1 million and a non-cash benefit of $1.7 million. Our non-cash benefit consisted primarily of non-cash charges for stock-based compensation. The net change in our operating assets and liabilities primarily reflects cash inflows from changes in accounts receivable and accrued compensation expenses, partially offset by outflows from changes in current and non-current other assets and contract liabilities.
During the nine months ended September 30, 2023, cash used in operating activities was $7.3 million, consisting of a net loss of $8.1 million, an unfavorable net change in operating assets and liabilities of $0.5 million, partially offset by a non-cash benefit of $1.3 million. Our non-cash benefit consisted primarily of non-cash charges for stock-based compensation.
| -21- |
Investing Activities
For the nine months ended September 30, 2024, net cash flows provided by investing activities was $8 million, consisting mainly of withdrawal of short-term deposits.
For the nine months ended September 30, 2023, net cash flows used in investing activities was $0.6 million, consisting mainly of investment, net on short-term deposits.
Financing Activities
During the nine months ended September 30, 2024, cash provided by financing activities was $9.9 million, consisting of cash proceeds from issuance of shares, net of issuance costs.
During the nine months ended September 30, 2023, cash provided by financing activities was $13.9 million, consisting of cash proceeds from issuance of shares and warrants, net of issuance costs.
Comparison of the three months ended September 30, 2024 and 2023
The following table summarizes our results of operations for the three months period ended September 30, 2024, and 2023, together with the changes in those items in dollars and as a percentage:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | % Change | ||||||||||
| Revenues | 1,292,000 | 110,000 | 1075 | % | ||||||||
| Cost of Revenues | 887,000 | 321,000 | 176 | % | ||||||||
| Gross Profit (Loss) | 405,000 | (211,000 | ) | |||||||||
| Research and development expenses | 1,730,000 | 1,354,000 | 28 | % | ||||||||
| Sales and marketing expense | 347,000 | 208,000 | 67 | % | ||||||||
| General and administrative expenses | 1,344,000 | 1,099,000 | 22 | % | ||||||||
| Operating Loss | (3,016,000 | ) | (2,872,000 | ) | 5 | % | ||||||
Revenues
For the three months ended September 30, 2024, we generated revenues of $1,292,000, an increase of $1,182,000, or 1,075%, compared to revenues of $110,000 for the three months ended September 30, 2023.
The increase in revenues was primarily attributable to an increase in revenues from a Fortune 500 multinational healthcare corporation, as well as recognition of revenues from Industry 4.0.
The increase in revenues from a Fortune 500 multinational healthcare corporation (see note 6 to our interim financial statements) was mainly due to:
| - | an increase in the number of units sold and supplied to the customer during the three months ended September 30, 2024, and | |
| - | formalization of negotiations with the customer, following which the sale price per unit increased significantly compared to the previous sale price. |
Cost of Revenues
Cost of revenue is primarily comprised of cost of personnel and certain allocated expenses related to facilities, logistics, and quality control.
Cost of revenues for the three months ended September 30, 2024 was $887,000, an increase of $566,000, or 176%, compared to cost of revenues of $321,000 for the three months ended September 30, 2023.
The increase in cost of revenues was primarily due to increase in revenues.
Gross Profit ( Loss)
Gross profit for the three months ended September 30, 2024, was $405,000 compared to gross loss for the three months ended September 30, 2023 of $211,000.
The change was due to both an increase in revenues and an increase in cost of revenues, as described above.
The transition from a gross loss to a gross profit was principally attributable to:
| - | formalization of negotiations with the Fortune 500 multinational healthcare corporation, following which the unit price experienced a substantial increase compared to its previous level; and | |
| - | an increase in the number of units sold and supplied to the customer during the three months ended September 30, 2024. |
| -22- |
Research and Development Expenses
Research and development efforts are focused on new products development, as well as developing and enhancing functionality for our existing products. These expenses primarily consist of employee-related expenses, including salaries, benefits, and stock-based compensation expense for personnel engaged in research and development functions, consulting, and professional fees related to research and development activities, prototype materials, facility costs, and other allocated expenses, including cost related to rent and maintenance of our facilities, utilities, depreciation, and other supplies. We expense research and development costs as incurred.
Research and development expenses for the three months ended September 30, 2024 were $1,730,000, an increase of $376,000, or 28%, compared to $1,354,000 for the three months ended September 30, 2023.
The increase was mainly due to the following reasons:
| - | an increase in stock-based compensation due to new options grants; | |
| - | procuring materials and employment of subcontractors for Industry 4.0 projects; and | |
| - | development of new products. |
We expect that our research and development expenses will increase as we continue to develop and improve our products and services in the I4.0 domain.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of payroll and related expenses, consulting services, promotional materials, exhibitions, demonstration equipment, and certain allocated facility infrastructure costs.
Sales and marketing expenses for the three months ended September 30, 2024, were $347,000, an increase of $139,000, or 67%, compared to $208,000 for the three months ended September 30, 2023.
The increase was mainly due to the following reasons:
| - | an increase in stock-based compensation due to new options grants; and | |
| - | exhibition and international travel expenses. |
We expect that our sales and marketing expenses will increase as we expand our commercial activity in the I4.0 domain.
General and Administrative Expenses
General and administrative expenses primarily consist of payroll and other related costs, including stock-based compensation. General and administrative expenses also include direct and allocated cost, such as facility-related, professional fees, legal, patent, investors and public relations, accounting, auditing, tax services, and insurance costs.
General and administrative expenses for the three months ended September 30, 2024, were $1,344,000, an increase of $245,000, or 22%, compared to $1,099,000 for the three months ended September 30, 2023.
The increase in general and administrative expenses was primarily due to:
| - | an increase in professional services expenses due to the hiring of a financial consultant, IR consultant, HR consultant and the appointment of new directors; | |
| - | an increase in payroll and related expenses due to cash compensation bonuses paid to existing employees, including the CEO, CFO, and Senior VP of Product Portfolio; and | |
| - | an increase in stock-based compensation due to new options grants. |
Operating loss
We incurred an operating loss of $3,016,000 for the three months ended September 30, 2024, an increase of $144,000, or 5%, compared to operating loss of $2,872,000 for the three months ended September 30, 2023.
The increase in operating loss was primarily due to an increase in sales and marketing expenses, research and development expenses, and general and administrative expenses, partially offset by an increase in gross profit, each as described above.
| -23- |
Cash Flows
The following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):
| Three month ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash used in Operating Activity | (2,199,000 | ) | (2,255,000 | ) | ||||
| Cash provided by (used in) Investing Activity | (8,000 | ) | 14,963,000 | |||||
| Cash provided by (used in) Financing Activity | 9,850,000 | (78,000 | ) | |||||
Operating Activities
Our primary use of cash from operating activities was for payroll expenses, research and development costs, manufacturing costs, marketing and promotional expenses, professional services costs and costs related to our facilities. We expect that cash flows related to our operating activities will continue to increase as our business and our working capital requirements grow.
During the three months ended September 30, 2024, cash used in operating activities was $2.2 million, consisting of net loss of $2.9 million, a favorable net change in operating assets and liabilities of $0.1 million and a non-cash benefit of $0.5 million. Our non-cash benefit consisted primarily of non-cash charges of $0.5 million for stock-based compensation.
During the three months ended September 30, 2023, cash used in operating activities was $2.3 million, consisting of a net loss of $2.5 million, an unfavorable net change in operating assets and liabilities of $0.3 million and a non-cash benefit of $0.5 million. Our non-cash benefit consisted primarily of non-cash charges of $0.3 million for stock-based compensation.
Investing Activities
For the three months ended September 30, 2024, net cash flows used in investing activities was $8,000, attributable mainly to a purchase of property and equipment.
For the three months ended September 30, 2023, net cash provided by investing Activity was $15 million, consisting mainly of withdrawal, net on short-term deposits.
Financing Activities
During the three months ended September 30, 2024, cash provided by financing activities was $9.9 million, consisting of cash proceeds from issuance of shares, net of issuance costs.
For the three months ended September 30, 2023, net cash flows used in financing activities was $78,000, consisting of issuance expenses.
Contractual Obligations and Commitments
During the nine months ended September 30, 2024, there were no material changes to our contractual obligations and commitments since the year ended December 31, 2023.
Liquidity and Capital Resources
As of September 30, 2024, we had cash, cash equivalents and restricted cash of $21 million compared to cash and cash equivalents and short-term deposits of $17 million as of December 31, 2023. In addition, as of September 30, 2024, we incurred an accumulated deficit of approximately $42.4 million, as compared to $34.2 million as of December 31, 2023.
During July 2024, we closed a private placement in which we issued 2,144,583 shares of our common stock for a purchase price of $4.80 per share to new and existing investors resulting in gross proceeds of $10.3 million.
Our primary sources of liquidity to date have been from fund-raising and warrant exercises.
Additional Cash Requirements
We plan to continue to invest in long-term growth, and therefore we expect that our expenses will grow. We currently believe that our existing cash and cash equivalents and short-term deposits will allow us to fund our operating plan through at least the next 12 months. We expect our expenses will increase in connection with our ongoing activities, particularly as we continue the research and development and the scale up process of our I4.0 solutions. We expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. We may raise these funds through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our common stock. There is no assurance that we will be able to maintain operations at a level sufficient for investors to obtain a return on their investment in our common stock, or that we will be able to raise sufficient capital required to implement our business plan on acceptable terms, if at all. Even if we are successful in raising sufficient capital to implement our business plan, we will, most likely, continue to be unprofitable for the foreseeable future. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.
| -24- |
Off-Balance Sheet Arrangements
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information requested by this Item.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
No change in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(e), occurred during the fiscal quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There have been no unregistered sales of equity securities in addition to the sales provided under Form 8-K as filed with the Securities and Exchange Commission (“SEC”) during the recent fiscal quarter ended September 30, 2024.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5. OTHER INFORMATION
Mr. Ido Molad, our VP Research and Development, updated the Company that due to personal reasons he intends to step down from his position on November 21, 2024. Mr. Molad will continue to be employed by the Company in a different capacity. The Company has nominated Mr. Gal Shir, its Operation Manager, as acting VP R&D until a new VP R&D is recruited.
During
the quarter ended September 30, 2024, no director or officer of the Company
We use our website (www.odysight.ai) as a channel of distribution for Company information. The information we post on our website may be deemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website are not, however, a part of this Quarterly Report.
| -25- |
ITEM 6. EXHIBITS.
| (a) | The following documents are filed as exhibits to this Quarterly Report or incorporated by reference herein. |
* Filed herewith
** Furnished herewith
| -26- |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: November 14, 2024 | ODYSIGHT.AI INC | |
| By: | /s/ Yehu Ofer | |
| Name: | Yehu Ofer | |
| Title: | Chief Executive Officer | |
| Odysight.ai Inc | ||
| By: | /s/ Einav Brenner | |
| Name: | Einav Brenner | |
| Title: | Chief Financial Officer | |
| Odysight.ai Inc | ||
| -27- |