Business context and reporting period
This is ScoutCam Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022, filed August 11, 2022. The filing describes image-based camera and AI solutions for predictive maintenance and condition monitoring, with a growing focus on industrial markets. The requested company is Odysight.Ai Inc., but the filing identifies the registrant as ScoutCam Inc.; verify the entity and filing match.
All financial amounts below are in U.S. dollars; financial statement amounts are generally in thousands.
Financial results and liquidity
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | $370,000; up 35% year over year | $372,000; up 25% |
| Gross loss | $191,000, versus $133,000 | $477,000, versus $312,000 |
| Operating loss | $2.581 million, versus $2.097 million | $5.350 million, versus $3.687 million |
| Net loss | $2.772 million, versus $2.088 million | $5.560 million, versus $3.694 million |
| Operating cash used | $2.174 million, versus $2.280 million | $2.398 million, versus $3.054 million |
For the six months, R&D expense rose 207% to $1.975 million; sales and marketing expense rose 10% to $446,000; and general and administrative expense rose 5% to $2.452 million. Gross loss widened as costs increased faster than revenue. Basic and diluted loss per share for the six-month period was $0.78, compared with $0.67.
At June 30, 2022, cash and cash equivalents were $7.314 million and short-term deposits were $9.536 million, totaling $16.850 million; combined balances were $19.594 million at December 31, 2021. Current assets were $17.968 million and current liabilities $2.656 million. Total liabilities were $5.550 million, including $3.855 million of contract liabilities and $365,000 of operating lease liabilities. The filing reports no debt balance. Accumulated deficit was $20.854 million.
Material changes and operating developments
- Revenue growth was primarily attributed to $327,000 of six-month revenue from a miniature-camera solution for a Fortune 500 customer, following completion of verification and validation and transition from development to production. Revenue from A.M. Surgical was nil in the first half of 2022, compared with approximately $200,000 in the prior-year period; occasional component-product sales also declined.
- Remaining performance obligations were $3.855 million at quarter-end, expected to be recognized over the product’s anticipated manufacturing term. The company recognized $106,000 of previously deferred development-service revenue during the period.
- Operating cash use improved year over year, partly supported by a $1.435 million increase in contract liabilities. Investing cash flow was a $1.458 million source, mainly reflecting net withdrawals of short-term deposits. There were no financing cash inflows in the first half of 2022, compared with $21.622 million in the prior-year period.
- Share-based compensation was $1.457 million for the six months. Outstanding common shares were 7,121,737 at June 30, 2022.
Outlook, risks, and other notable items
Management said cash and cash resources were expected to fund the operating plan for more than 12 months from issuance of the financial statements, and separately stated existing cash, cash equivalents, and short-term deposits were expected to cover anticipated needs for at least 12 months. Management also expects significant additional funding will be needed for continuing operations and commercialization, and cautioned that future financing may dilute shareholders or may not be available on acceptable terms. The company expects R&D, sales and marketing, commercialization, manufacturing, distribution, and public-company costs to increase; it expects to remain unprofitable for the foreseeable future.
Revenue is concentrated among a limited number of customers. The filing cites start-up-stage risks and says the company may have to delay or reduce development or commercialization if it cannot raise capital. Management reported no material adverse COVID-19 impact as of June 30, 2022, no material change to the risk factors in the 2021 Form 10-K, no material pending legal claims, and effective disclosure controls. The CEO’s employment was mutually agreed to terminate on October 18, 2022. No off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Confirm that this ScoutCam Inc. filing is the intended filing for Odysight.Ai Inc.
- Assess the Fortune 500 customer’s production ramp, revenue concentration, and the timing and conversion of the $3.855 million in remaining performance obligations.
- Reconcile management’s stated 12-month liquidity outlook with ongoing operating cash burn and its stated need for substantial additional funding.
- Review the drivers of higher R&D and cost of revenue, including whether production can improve gross economics.
- Verify the CEO transition and evaluate potential dilution from future financing, outstanding warrants, and equity awards.