Odysight.ai Inc 10-Q, filed Nov 12, 2020

Odysight.ai Inc. (ODYS)

10-Q 2020-11-12 For: 2020-09-30

Added on April 07, 2026

About this 10-Q

Odysight.ai Inc filed this 10-Q on November 12, 2020, covering the quarter ended September 30, 2020.

Headline figures

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

Revenue: $12K; down 90.6% from $128K a year earlier
Net loss: $1.03M; compared with a net loss of $366K 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	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Control and Procedures	25

PART II-OTHER INFORMATION

Item 1A.	Risk Factors	26

Item 6.	Exhibits	27

SIGNATURES		28

	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

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

CURRENT ASSETS:
Cash and cash equivalents		3,150		3,245
Accounts receivables		-		22
Inventory		1,483		900
Parent company		30		73
Other current assets		277		78
		4,940		4,318

NON-CURRENT ASSETS:
Property and equipment, net		257		59
Operating lease right-of-use assets		112		53
Severance pay asset		327		327
		696		439

TOTAL ASSETS		5,636		4,757

	Nine months ended						Three months ended
	September 30,						September 30,
	2020			2019			2020			2019
	Unaudited
	USD in thousands (except per share data)
Revenues:
Products		86			187			12			43
Services		-			85			-			85
		86			272			12			128
Cost of revenues:
Products		434			355			153			51
Services		-			85			-			85
		434			440			153			136

Gross Loss		(348	)		(168	)		(141	)		(8	)
Research and development expenses		514			216			144			75
Sales and marketing expenses		302			130			114			47
General and administrative expenses		2,309			541			629			227
Operating loss		(3,473	)		(1,055	)		(1,028	)		(357	)
Financing income (expenses), net		63			(16	)		1			(8	)
Loss before taxes on income		(3,410	)		(1,071	)		(1,027	)		(365	)
Taxes on income		-			(2	)		-			(1	)
Net Loss		(3,410	)		(1,073	)		(1,027	)		(366	)
Net loss per ordinary share (basic and diluted, USD)		(0.11	)		(0.07	)		(0.03	)		(0.02	)
Weighted average ordinary shares (basic and diluted, in thousands)		30,728			16,131			33,764			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		-		-		961		-			961
Conversion of a loan from Parent company		787	$	1		380		-			381
Net loss		-		-		-		(3,410	)		(3,410	)

Balance at September 30, 2020		33,764	$	34		8,328		(5,050	)		3,312

	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. This 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 allocations 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 shareholders’ 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 shareholders’ 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 nine months ended September 30, 2020, the Company incurred a loss of USD 3,410 thousand and negative cash flows from operating activities of approximately USD 2,710 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 COVID-19 pandemic has had a significant impact on global markets and the global economy, including countries in which the Company operates. As the extent of the impact on the global economy remains unclear, the Company anticipates that it will have a continuing impact on global economies in the near and long-term future. In light of the below mentioned factors, the COVID-19 pandemic had and most likely will continue to have a material effect on the Company’s operations, and the extent to which the COVID-19 pandemic will impact the Company’s operations will depend on future developments. In particular, the continued spread of COVID-19 globally had and most likely will continue to have material adverse impact on the Company’s operations and workforce, including its manufacturing activities, product sales, as well as its ability to continue to raise capital. Travel restrictions had and most likely will continue to have a material adverse impact on our sales and marketing and research and development efforts.

	Nine months ended September 30, 2020
	USD in thousands
Cash payments for operating leases		36
Cash payments for short-term lease		53
Total lease expenses		89

	Operating leases
	USD in thousands
Remainder of 2020		15
2021		59
2022		52
Total future lease payments		126
Less imputed interest		(14	)
Total lease liability balance		112

	Nine months ended September 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 nine months ended September 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		1,361,459		0.29

	Nine months ended September 30, 2020
	USD in thousands
Research and development		125
General and administrative		802
Total expenses		927

	September 30, 2020		December 31, 2019

Parent Company		30		73
Loan from Parent Company (see note 4(d))		-		500

	Nine months ended						Three months ended
	September 30,						September 30,
	2020			2019			2020			2019
	Unaudited
	USD in thousands

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		(3,410	)		(1,073	)		(1,027	)		(366	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		51			3			24			2
Other non-cash items		1			63			(13	)		28
Share based compensation		927			-			90			-
Profit from exchange differences on cash and cash equivalents		(87	)		-			(3	)		-

CHANGES IN OPERATING ASSET AND LIABILITY ITEMS:
Accounts receivable		22			27			26			(46	)
Inventory		(546	)		(628	)		(244	)		(319	)
Parent company		2			54			113			156
Other current assets		(199	)		(38	)		55			49
Accounts payables		146			40			13			(47	)
Contract liabilities		699			72			529			67
Accrued compensation expenses		78			135			42			47
Other accrued expenses		(394	)		65			(38	)		48
Net cash flows used in operating activities		(2,710	)		(1,280	)		(433	)		(381	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Change in severance pay asset		-			(28	)		-			(28	)
Purchase of property and equipment		(249	)		(18	)		(28	)		(18	)
Net cash flows used in investing activities		(249	)		(46	)		(28	)		(46	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Transfer from Parent company		-			514			-			-
Sale of assets to Parent company		-			168			-			168
Capital contribution from Parent company		-			720			-			253
Proceeds from issuance of shares and warrants		2,858			-			-			-
Repayment of loan from Parent company		(81	)		-			-			-
Net cash flows provided by financing activities		2,777			1,402			-			421

PROFIT FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS		87			-			3			-

	Nine months ended September 30,
	2020		2019
Revenues		5		-
Cost of revenues		5		-
Interest payments		8		-

	2020			2019			% Change
Revenues		86,000			272,000			(68	)%
Cost of Revenues		434,000			440,000			(1	)%
Gross Loss		(348,000	)		(168,000	)		107	%
Research and development expenses		514,000			216,000			138	%
Sales and marketing expense		302,000			130,000			132	%
General and administrative expenses		2,309,000			541,000			327	%
Operating Loss		(3,473,000	)		(1,055,000	)		229	%

	2020			2019
Cash used in Operating Activity		(2,710,000	)		(1,280,000	)
Cash used in Investing Activity		(249,000	)		(46,000	)
Cash provided by Financing Activity		2,777,000			1,402,000
Profit from exchange differences on cash equivalents		87,000			-

Exhibit Number		Description

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: November 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 September 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.