Odysight.ai Inc 10-Q for FY2020 Q1

Odysight.ai Inc. (ODYS)

10-Q 2020-06-22 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Odysight.ai Inc filed this 10-Q on June 22, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $40K; up 66.7% from $24K a year earlier
Net loss: $1.41M; compared with a net loss of $329K 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	9

	Notes to Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23

Item 4.	Control and Procedures	23

PART II-OTHER INFORMATION

Item 1A.	Risk Factors	24

Item 6.	Exhibits	25

SIGNATURES		26

	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)	9
Notes to the Interim Condensed Consolidated Financial Statements	10

	March 31,		December 31,
	2020		2019
	Unaudited		Audited
	USD in thousands
Assets

CURRENT ASSETS:
Cash and cash equivalents		2,847		3,245
Accounts receivables		12		22
Inventory		1,044		900
Parent company		48		73
Other current assets		256		78
		4,207		4,318

NON-CURRENT ASSETS:
Property and equipment, net		108		59
Operating lease right-of-use assets		72		53
Severance pay asset		289		327
		469		439

TOTAL ASSETS		4,676		4,757

	Three months ended
	March 31,
	2020			2019
	Unaudited
	USD in thousands (except per share data)
Revenues:
Products		40			24
Services		-			-
		40			24
Cost of revenues:
Products		130			109
Services		-			-
		130			109

Gross Loss		(90	)		(85	)
Research and development expenses		255			87
Sales and marketing expenses		52			41
General and administrative expenses		1,112			116
Operating loss		(1,509	)		(329	)
Financing income, net		96			-
Net Loss		(1,413	)		(329	)

Net loss per ordinary share (basic and diluted, USD)		(0.05	)		(0.02	)
Weighted average ordinary shares (basic and diluted, in thousands)		27,488			16,131

	Ordinary shares				Additional paid-in		Accumulated			Total Shareholders’
	Number		Amount		capital		deficit			equity
			USD in thousands
Balance at January 1, 2020		26,885	$	27		4,135		(1,640	)		2,522
Issuance of shares and warrants		1,960		2		907		-			909
Stock based compensation		-		-		701		-			701
Net loss		-		-		-		(1,413	)		(1,413	)

Balance at March 31, 2020		28,845	$	29		5,743		(3,053	)		2,719

	Three months ended
	March 31,
	2020			2019
	Unaudited
	USD in thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		(1,413	)		(329	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		11			1
Other non-cash items		39			19
Share based compensation		682			-
Profit from exchange differences on cash and cash equivalents		(96	)		-

CHANGES IN OPERATING ASSET AND LIABILITY ITEMS:
Accounts receivable		10			87
Inventory		(125	)		(218	)
Other current assets		(53	)		29
Accounts payables		5			(18	)
Parent company		(16	)		(76	)
Contract liabilities		44			-
Accrued compensation expenses		(24	)		8
Other accrued expenses		(201	)		(17	)
Net cash flows used in operating activities		(1,137	)		(514	)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment		(185	)		-
Net cash flows used in investing activities		(185	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Loan repayment to Parent company		(81	)		-
Transfer from Parent company		-			514
Capital Contribution from Parent company		-			90
Proceeds from issuance of shares and warrants		909			-
Net cash flows provided by financing activities		828			604

PROFIT FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS		96			-

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(398	)		90
BALANCE OF CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		3,245			-
BALANCE OF CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		2,847			90

	Three months ended March 31,
	2020		2019
	USD in thousands
Parent Company loan settled against Parent Company receivable		41		-

	b.	The accompanying comparative consolidated financial statements include the historical accounts of ScoutCam 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 ScoutCam’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 include 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 ScoutCam in addition to transactions between Medigus and ScoutCam.

	c.	During the three month ended March 31, 2020, the Company incurred a loss of USD 1,413 thousand and negative cash flows from operating activities of approximately USD 1,137 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.

	Three months ended March 31, 2020
	USD in thousands
Cash payments for operating leases		12
Cash payments for short-term lease		15
Total lease expenses		27

	Operating leases
	USD in thousands
Remainder of 2020		25
2021		33
2022		23
Total future lease payments		81
Less imputed interest		(9	)
Total lease liability balance		72

	February 12, 2020		March 15, 2020
Underlying value of ordinary shares ($)		0.484		0.484
Exercise price ($)		0.29		0.29
Expected volatility (%)		43.35		45.25
Term of the options (years)		7		7
Risk-free interest rate		1.55		0.89

	For the Three months ended March 31, 2020
	Amount of options		Weighted average exercise price
				$
Outstanding at beginning of period		-		-
Granted		4,944,403		0.29
Outstanding at end of period		4,944,403		0.29

Vested at end of period		739,021		0.29

	Three months ended March 31, 2020
	USD in thousands
Research and development		108
General and administrative		574
Total expenses		682

	March 31, 2020		December 31, 2019

Parent Company		48		73
Loan from Parent Company		378		500

	Three months ended March 31,
	2020		2019
Revenues		5		-
Cost of revenues		5		-

	2020			2019			% Change
Revenues		40,000			24,000			67	%
Cost of Revenues		130,000			109,000			19	%
Gross Loss		(90,000	)		(85,000	)		6	%
Research and development expenses		255,000			87,000			193	%
Sales and marketing expense		52,000			41,000			27	%
General and administrative expenses		1,112,000			116,000			859	%
Operating Loss		(1,509,000	)		(329,000	)		359	%

	2020			2019
Cash used in Operating Activity		(1,137,000	)		(514,000	)
Cash used in Investing Activity		(185,000	)		-
Cash provided by Financing Activity		828,000			604,000
Profit from exchange differences on cash equivalents		96,000			-

Exhibit Number		Description
10.1		Form of Securities Purchase Agreement, dated March 3, 2020, by and among ScoutCam Inc. and certain investors listed therein (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 5, 2020)

10.2		Form of Registration Rights Agreement, dated March 3, 2020, by and among ScoutCam Inc. and those certain investors that are a party to the Securities Purchase Agreement dated March 3, 2020 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on March 5, 2020)

10.3		Form of Warrant A, by and among ScoutCam Inc. and those certain investors that are a party to the Securities Purchase Agreement dated March 3, 2020 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on March 5, 2020)

10.4		Form of Warrant B, by and among ScoutCam Inc. and those certain investors that are a party to the Securities Purchase Agreement dated March 3, 2020 (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on March 5, 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: June 22, 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 March 31, 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.