ScoutCam Inc. — Q1 2021 Form 10-Q
Entity and period: The supplied filing is for ScoutCam Inc., not Odysight.Ai Inc. It covers the unaudited three months ended March 31, 2021, with year-over-year comparisons to Q1 2020. Financial amounts below are in U.S. dollars; unless stated otherwise, figures are in thousands.
Business context and operating results
ScoutCam develops and manufactures miniature camera and endoscopy systems for medical and industrial applications. Management said its main focus was completing R&D and transitioning a product under contract with a Fortune 500 multinational healthcare corporation toward production, while expanding R&D, marketing, and production capabilities.
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $24 | $40 | Down 40% |
| Cost of revenue | $203 | $130 | Up 56% |
| Gross loss | $(179) | $(90) | Loss increased $89 |
| Research and development | $333 | $255 | Up 31% |
| Sales and marketing | $145 | $52 | Up 179% |
| General and administrative | $933 | $1,112 | Down 16% |
| Operating loss | $(1,590) | $(1,509) | Loss increased 5% |
| Net loss | $(1,606) | $(1,413) | Loss increased $193 |
| Basic and diluted loss per share | $(0.04) | $(0.05) | — |
Revenue declined mainly because of lower sales of component products to occasional customers. Cost of revenue rose with additional production payroll and establishment of an engineering department. R&D spending increased with materials, subcontractors, and expanded development activity; marketing costs rose with stepped-up marketing efforts. Lower share-based compensation contributed to the decline in G&A.
Cash flow, liquidity, and balance sheet
- Cash and cash equivalents were $12,751 at March 31, 2021, versus $3,373 at December 31, 2020. Total assets were $26,429 and total liabilities $4,093.
- Current assets were $24,061 and current liabilities $2,304; reported figures imply working capital of approximately $21,757. The balance sheet presents no conventional loan or borrowing balance at quarter-end.
- Operating cash outflow was $774, compared with $1,137 in Q1 2020; investing cash outflow was $117, versus $185. Financing provided $10,281, compared with $828, including $9,500 from share-and-warrant issuance and $781 from warrant exercises.
- On March 22, the company agreed to issue 22,222,223 units for an aggregate $20 million. The units included common shares and warrants exercisable at $1.15 per share. At quarter-end, $10,500 was recorded as a receivable on account of share issuance; the cash-flow statement reports $9,500 of issuance proceeds received.
- Accumulated deficit was approximately $7.9 million. Contract liabilities totaled $1,511; remaining performance obligations were $2.9 million, expected to be recognized over the product’s expected manufacturing term.
Outlook, risks, and notable items
- Management said cash and proceeds from the offering would fund the operating plan for at least the next 12 months, but expected significant continuing R&D and other costs and said additional funding would be needed until the company becomes profitable.
- No specific revenue, earnings, or other quantified guidance was provided. Management described a transition toward production under the healthcare-corporation contract and expansion of its workforce and capabilities.
- Management reported no material adverse COVID-19 impact on results or financial position as of March 31, 2021, while noting estimates could change as information develops. The company characterized itself as a startup and cautioned that actual results may differ materially from forward-looking statements.
- Management reported no material changes to the risk factors in the 2020 Form 10-K, no pending legal claims believed likely to materially affect the company, and effective disclosure controls. A new office lease began after quarter-end, on April 4; its rental payments are linked to the Israeli CPI.
Important facts for investors to verify
- Confirm the issuer identity: this filing names ScoutCam Inc., whereas the request identifies Odysight.Ai Inc.
- Verify the status and collection of the $10.5 million share-issuance receivable and reconcile it with the $20 million offering commitment and $9.5 million of reported cash proceeds.
- Track production progress, customer-contract performance, revenue conversion of the $2.9 million RPO, and whether revenue grows enough to improve the negative gross result.
- Assess ongoing cash burn, funding requirements, and potential dilution from the March 2021 warrants and other outstanding warrants and options.
- Review the risk factors and forward-looking statements in the referenced 2020 Form 10-K; the filing does not reproduce their full detail.