Foresight Autonomous Holdings Ltd. — FY2017 Form 20-F
Reporting period: Year ended December 31, 2017; filed March 27, 2018. This is an annual report, not a standalone fourth-quarter report. Financial statements are prepared under U.S. GAAP and amounts below are U.S. dollars.
Business context
Foresight is an Israeli development-stage technology company developing camera-based vision systems for automotive driver assistance and autonomous vehicles. Its products included Eyes-On (ADAS), QuadSight (multi-spectral vision) and Eye-Net (cellular V2X). It reported no product revenue and had not commercialized its products by year-end.
Key financial metrics
| Metric | FY2017 / Dec. 31, 2017 | FY2016 / Dec. 31, 2016 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.089 million | $0.904 million |
| Marketing and sales expense | $1.015 million | $0.224 million |
| General and administrative expense | $3.753 million | $2.627 million |
| Operating loss | $8.857 million | $3.755 million |
| GAAP net loss | $15.942 million; $0.17 loss per share | $1.913 million; $0.03 loss per share |
| Management-reported non-GAAP net loss | $5.274 million; $0.06 loss per share | $3.355 million; $0.05 loss per share |
| Cash and cash equivalents | $9.636 million | $3.364 million |
| Short-term deposits | $12.169 million | $0.390 million |
| Total assets | $28.035 million | $5.257 million |
| Total current liabilities | $1.147 million | $0.457 million |
| Total liabilities | $3.218 million | $0.588 million |
| Shareholders’ equity | $24.817 million | $4.669 million |
| Operating cash used | $5.073 million | $2.380 million |
| Capital expenditures | $0.271 million | $0.073 million |
Margins are not meaningful because the company had no revenue. The filing reports no conventional debt securities; year-end liabilities included a $2.071 million derivative warrant liability. Cash, cash equivalents and short-term deposits totaled $21.805 million.
Material changes versus FY2016
- Operating expenses rose substantially as the company expanded development and commercial preparation: R&D increased 452%, marketing and sales 453%, and general and administrative expense 43%.
- GAAP net loss increased to $15.942 million, primarily reflecting a $12.180 million warrant revaluation expense, partly offset by a $3.967 million gain from revaluation of Rail Vision warrant investments. These valuation items materially affected reported earnings; management’s non-GAAP reconciliation excludes them and stock-based compensation.
- Operating cash use increased to $5.073 million. Financing provided $23.395 million, mainly from share issuance and warrant and option exercises; investing cash use of $12.050 million was mainly the purchase of short-term deposits.
- Ordinary shares outstanding grew from 73.1 million to 109.5 million. The company raised net proceeds of approximately $10.745 million through 2017 private placements and received proceeds from warrant and option exercises.
Outlook, risks and unusual items
- Management said existing cash, cash equivalents and short-term deposits should fund current operations for the foreseeable future, but substantial additional capital will be needed to complete development and commercialize products. The company warned that unavailable funding could force delays or cuts and raise substantial doubt about its ability to continue as a going concern.
- Management did not expect product-sale revenue in the next few years and expected operating and R&D expenses to increase as development, hiring and commercialization preparations continued. No quantified revenue or earnings guidance was provided.
- Eyes-On had undergone pilots, demonstrations and road-trial data collection. QuadSight was demonstrated at CES in early 2018, with proof of concept expected in Q2 2018. Eye-Net demonstrations took place in early 2018.
- In March 2018, Foresight signed a non-binding MOU to spin off Eye-Net activities and merge them into Tamda in exchange for approximately 74.5% of Tamda’s shares. Closing was subject to due diligence, approvals, a tax ruling and other conditions; completion was not assured.
- Foresight held a 24.76% direct interest in Rail Vision at year-end (35.97% fully diluted). In January 2018 it exercised Rail Vision warrants for $2.240 million; the filing says its resulting stake was 32.62% (35.73% fully diluted).
- Key risks include continued losses and financing needs, product-development and commercialization uncertainty, competition and rapid technological change, product liability, supplier dependence, intellectual-property challenges, Israeli political and security conditions, NIS/U.S. dollar exposure, and IIA grant restrictions. IIA grants totaled approximately $613,000 and carry 3%–5% royalties on qualifying future sales, along with restrictions on transferring certain technology or manufacturing outside Israel.
- The company reported no material legal proceedings and no off-balance-sheet arrangements. Its auditor gave an unqualified opinion on the financial statements. Management concluded disclosure controls were effective, but the filing included no management assessment or auditor attestation on internal control over financial reporting.
Important facts for investors to verify
- Confirm the full-year figures against the audited statements and distinguish the $15.942 million GAAP loss from the $5.274 million non-GAAP loss and its exclusions.
- Assess cash runway using operating cash use, committed development and lease obligations, and the company’s stated need for additional commercialization capital.
- Track product milestones, customer pilots and any evidence of commercial orders or revenue; the filing reports none from product sales.
- Check whether the Eye-Net/Tamda transaction closed and review its final terms, approvals, ownership and funding requirements.
- Reconcile Rail Vision ownership and the January 2018 warrant exercise, and monitor the value and accounting treatment of related investments.
- Review potential dilution from outstanding warrants, options and future fundraising, as well as the IIA royalty and technology-transfer conditions.