Odysight.ai Inc 10-Q for FY2020 Q2

Odysight.ai Inc. (ODYS)

10-Q 2020-08-12 For: 2020-06-30

Added on April 07, 2026

About this 10-Q

Odysight.ai Inc filed this 10-Q on August 12, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $34K; down 71.7% from $120K a year earlier
Net loss: $970K; compared with a net loss of $362K a year earlier

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Suite 7A, Industrial Park
P.O. Box 3030, Omer, Israel		8496500
(Address of Principal Executive Offices)		(Zip Code)

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

[ ]	Large accelerated filer	[ ]	Accelerated filer
[X]	Non-accelerated filer	[X]	Smaller reporting company
		[ ]	Emerging growth company

		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	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

Item 4.	Control and Procedures	26

PART II-OTHER INFORMATION

Item 1A.	Risk Factors	27

Item 6.	Exhibits	28

SIGNATURES		29

	Page
Interim 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	11

	June 30,		December 31,
	2020		2019
	Unaudited		Audited
	USD in thousands
Assets

CURRENT ASSETS:
Cash and cash equivalents		3,608		3,245
Accounts receivables		26		22
Inventory		1,239		900
Parent company		143		73
Other current assets		332		78
		5,348		4,318

NON-CURRENT ASSETS:
Property and equipment, net		253		59
Operating lease right-of-use assets		94		53
Severance pay asset		314		327
		661		439

TOTAL ASSETS		6,009		4,757

	Six months ended						Three months ended
	June 30,						June 30,
	2020			2019			2020			2019
	Unaudited
	USD in thousands (except per share data)
Revenues:
Products		74			59			34			35
Services		-			85			-			85
		74			144			34			120
Cost of revenues:
Products		281			219			151			110
Services		-			85			-			85
		281			304			151			195

Gross Loss		(207	)		(160	)		(117	)		(75	)
Research and development expenses		370			141			115			54
Sales and marketing expenses		188			84			136			43
General and administrative expenses		1,680			292			568			176
Operating loss		(2,445	)		(677	)		(936	)		(348	)
Financing income (expenses), net		62			(14	)		(34	)		(14	)
Net Loss		(2,383	)		(691	)		(970	)		(362	)
Net loss per ordinary share (basic and diluted, USD)		(0.08	)		(0.04	)		(0.03	)		(0.02	)
Weighted average ordinary shares (basic and diluted, in thousands)		29,185			16,131			30,880			16,131

	Ordinary shares				Additional paid-in		Accumulated			Total Shareholders’
	Number		Amount		capital		deficit			equity
	in thousands		USD in thousands
Balance at January 1, 2020		26,885	$	27		4,135		(1,640	)		2,522
Issuance of shares and warrants		6,092	$	6		2,852		-			2,858
Stock based compensation		-		-		871		-			871
Conversion of a loan from Parent company		787	$	1		380		-			381
Net loss		-		-		-		(2,383	)		(2,383	)

Balance at June 30, 2020		33,764	$	34		8,238		(4,023	)		4,249

	Six months ended						Three months ended
	June 30,						June 30,
	2020			2019			2020			2019
	Unaudited
	USD in thousands

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		(2,383	)		(691	)		(970	)		(362	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		27			1			16			-
Other non-cash items		14			19			(25	)		-
Share based compensation		837			-			155			-
Loss (Profit) from exchange differences on cash and cash equivalents		(84	)		-			12			-

CHANGES IN OPERATING ASSET AND LIABILITY ITEMS:
Accounts receivable		(4	)		73			(14	)		(14	)
Inventory		(302	)		(309	)		(177	)		(91	)
Parent company		(111	)		(102	)		(95	)		(26	)
Other current assets		(254	)		(87	)		(201	)		(116	)
Accounts payables		133			87			128			105
Contract liabilities		170			5			126			5
Accrued compensation expenses		36			88			60			80
Other accrued expenses		(356	)		17			(155	)		34
Net cash flows used in operating activities		(2,277	)		(899	)		(1,140	)		(385	)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment		(221	)		-			(36	)		-
Net cash flows used in investing activities		(221	)		-			(36	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Loan repayment to Parent company		(81	)		-			-			-
Transfer from Parent company		-			514			-			377
Capital Contribution from Parent company		-			467			-			-
Proceeds from issuance of shares and warrants		2,858			-			1,949			-
Net cash flows provided by financing activities		2,777			981			1,949			377

PROFIT (LOSS) FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS		84			-			(12	)		-

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		363			82			761			(8	)
BALANCE OF CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		3,245			-			2,847			90
BALANCE OF CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		3,608			82			3,608			82

	b.	The accompanying comparative consolidated financial statements include the historical accounts of the Subsidiary as a “Carve-out Business”, a division of Medigus. Throughout the comparative periods included in these Financial Statements, the Carve-out Business operated as part of Medigus. Separate financial statements have not historically been prepared for the Carve-out Business. These comparative carve-out financial data has been prepared on a standalone basis and is derived from Medigus’s consolidated financial statements and accounting records. The carve-out comparative financial data reflects the Subsidiary’s financial position, results of operations, changes in net parent deficit and cash flows in accordance with U.S. GAAP. The financial position, results of operations, changes in net parent deficit, and cash flows of the Carve-out Business may not be indicative of its results had it been a separate stand-alone entity during the comparative periods presented. The comparative carve-out financial data of the Company includes expenses which were allocated from Medigus for certain functions, including general corporate expenses related to corporate strategy, procurement, Information Technology (“IT”), Human Resources (“HR”) and legal. These allocation have been made on the basis of direct usage when identifiable, with the remainder allocated on the basis of headcount. Management believes the expense allocation methodology and results are reasonable and consistently applied for all comparative periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred by an independent company or of the costs to be incurred in the future. The carve-out comparative financial statements include assets and liabilities specifically attributable to the Carve-out Business. Medigus uses a centralized approach for managing cash and financing operations. Accordingly, a substantial portion of the cash balances are transferred to Medigus’ cash management accounts regularly and therefore are not included in the financial statements. Transfers of cash between Carve-out business and Medigus are included within “Net transfers from Parent company” on the Statements of Cash Flows and the Statements of changes in shareholder’s equity (capital deficiency). As the carve-out comparative financial information has been prepared on a carve-out basis, the amounts reflected in Parent Company deficit in the comparative statement of changes in shareholder’s equity (capital deficiency) refer to net loss for the period attributed to the Subsidiary in addition to transactions between Medigus and the Subsidiary.

	c.	During the six month ended June 30, 2020, the Company incurred a loss of USD 2,383 thousand and negative cash flows from operating activities of approximately USD 2,277 thousand. Based on the projected cash flows, the Company’s Management is of the opinion that without further fundraising it will not have sufficient resources to enable it to continue its operating activities including the development, manufacturing and marketing of its products within one year after the issuance date of these financial statements. As a result, there is a substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these financial statements.

		Management’s plans include continuing commercialization of the Company’s products and securing sufficient financing through the sale of additional equity securities, debt or capital inflows from strategic partnerships and other opportunities. There are no assurances however, that the Company will be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in commercializing its products and securing sufficient financing, it may need to reduce activities, curtail or even cease operations.

		These consolidated financial statements have been prepared assuming the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Accordingly, the consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The accounting policies set out below have, unless otherwise stated, been applied consistently.

	d.	The coronavirus (“COVID-19”), which was declared in March 2020 by the World Health Organization as a pandemic, has had a significant impact on global markets and the economy of many countries, including countries in which the Company operates. As the ultimate impact on the global economy of the COVID-19 pandemic remains unclear, the Company anticipates that it will have a continuing impact on global economies in the near future. While the COVID-19 pandemic has not materially affected the Company’s operations as of the date hereof, the extent to which the COVID-19 pandemic shall impact the Company’s operations will depend on future developments. In particular, the continued spread of COVID-19 globally could materially adversely impact the Company’s operations and workforce, including its manufacturing activities, product sales, as well as its ability to continue to raise capital. Travel restrictions could materially adversely impact our sales and marketing and research and development efforts.

	Six months ended June 30, 2020
	USD in thousands
Cash payments for operating leases		23
Cash payments for short-term lease		31
Total lease expenses		54

	Operating leases
	USD in thousands
Remainder of 2020		23
2021		45
2022		38
Total future lease payments		106
Less imputed interest		(12	)
Total lease liability balance		94

	Six months ended June 30, 2020
Underlying value of ordinary shares ($)		0.475
Exercise price ($)		0.29
Expected volatility (%)		43.91
Term of the options (years)		7
Risk-free interest rate (%)		1.25

	For the Six months ended June 30, 2020
	Amount of options		Weighted average exercise price
				$
Outstanding at beginning of period		-		-
Granted		6,489,172		0.29
Outstanding at end of period		6,489,172		0.29

Vested at end of period		1,203,237		0.29

	Six months ended June 30, 2020
	USD in thousands
Research and development		120
General and administrative		717
Total expenses		837

	June 30, 2020		December 31, 2019

Parent Company		143		73
Loan from Parent Company (see note 4(d))		-		500

	Six months ended June 30,
	2020		2019
Revenues		5		-
Cost of revenues		5		-
Interest payments		8		-

	2020			2019			% Change
Revenues		74,000			144,000			(49	)%
Cost of Revenues		281,000			304,000			(8	)%
Gross Loss		(207,000	)		(160,000	)		29	%
Research and development expenses		370,000			141,000			162	%
Sales and marketing expense		188,000			84,000			124	%
General and administrative expenses		1,680,000			292,000			475	%
Operating Loss		(2,445,000	)		(677,000	)		261	%

	2020			2019
Cash used in Operating Activity		(2,277,000	)		(899,000	)
Cash used in Investing Activity		(221,000	)		-
Cash provided by Financing Activity		2,777,000			981,000
Profit from exchange differences on cash equivalents		84,000			-

Exhibit Number		Description
10.1		Securities Purchase Agreement, dated May 18, 2020, by and between ScoutCam Inc. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)

10.2		Registration Rights Agreement, dated May 18, 2020, by and between ScoutCam Inc. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)

10.3		Voting Agreement, dated May 18, 2020, by and among ScoutCam Inc. Medigus Ltd. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)

10.4		Letter Agreement, dated May 18, 2020, by and among ScoutCam Inc., ScoutCam Ltd., Medigus Ltd. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)

10.5		Warrant A, by and between ScoutCam Inc. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)

10.6		Warrant B, by and between ScoutCam Inc. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)

10.7		Side Letter Agreement, by and between ScoutCam Inc. and Medigus Ltd., dated June 23, 2020 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on June 24, 2020)

10.8		Form of Warrant A by and between ScoutCam Inc. and Medigus Ltd. (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on June 24, 2020)

10.9		Form of Warrant A by and between ScoutCam Inc. and Medigus Ltd. (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on June 24, 2020)

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

32.1**		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.INS		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*		Filed herewith.

**		Furnished herewith.

Date: August 12, 2020	SCOUTCAM INC.

	By:	/s/ Yaron Silberman
	Name:	Yaron Silberman
	Title:	Chief Executive Officer
		ScoutCam Inc.

	By:	/s/ Tanya Yosef
	Name:	Tanya Yosef
	Title:	Chief Financial Officer
		ScoutCam Inc.

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2020 of ScoutCam Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the quarter end covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the quarter end presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the quarter end in which this report is being prepared;

b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the quarter end covered by this report based on such evaluation; and

d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.