Odysight.Ai Inc. quarterly report, Q3 FY2017

Business Context and Reporting Period

This Form 10-Q is filed by Intellisense Solutions Inc. for the three and nine months ended December 31, 2016, its fiscal third quarter. The filing does not identify the registrant as Odysight.Ai Inc.; investors should verify the company and filing identity. Intellisense reports no commercial sales or significant operations and says it is seeking to acquire or merge with an operating business. Its proposed merger with Dotz Nano Ltd. was terminated in May 2016.

Financial Results and Position

Nine-month net income included $50,000 of other income from the Dotz merger termination fee; it did not reflect operating revenue. The filing reports no meaningful revenue base, so an operating margin is not informative.

• At December 31, 2016, cash and total assets were $3,493, down from $8,124 at March 31, 2016.
• Current liabilities were $38,770, including $20,000 of notes payable; working capital was negative $35,277. Stockholders’ deficit was $35,277.
• Cash used in operating activities was $4,631 for the nine months, compared with $11,629 in the prior-year period. Ending cash was $3,493 versus $234 a year earlier.
• There were no capital expenditures or cash paid for interest or income taxes disclosed. No material off-balance-sheet arrangements were reported.

Changes Versus Prior Comparable Period

For the quarter, operating expenses declined to $5,104 from $11,418 and net loss narrowed to $6,123 from $11,418, mainly because the prior-year quarter included Dotz-related legal fees and transfer-agent costs. For the nine months, operating expenses fell to $24,833 from $46,659, largely due to lower merger-related legal fees, partly offset by higher accounting and audit fees. Net results shifted from a $46,659 loss to $22,871 income, primarily because of the $50,000 termination fee; the company continued to have no revenue.

Outlook, Risks, and Unusual Items

• Management says available cash is insufficient for its plans over the 12 months following December 31, 2016. It has no financing arranged and expects to seek loans and/or additional equity; there is no assurance it can raise funds. The filing states that without financing, the business will likely fail.
• The filing identifies substantial doubt about the company’s ability to continue as a going concern, citing accumulated losses of $108,425, a $35,277 working-capital deficit, and limited cash. Statements contain no adjustments that might be required if the company cannot continue.
• Two unsecured $10,000 notes were past due and in default at December 31, 2016. They were accruing interest at 15% after default; no extension had been negotiated as of February 10, 2017.
• The sole officer and director owns Eventus, which provides accounting and advisory services. The company incurred $15,533 in fees to Eventus during the nine months and owed it $621 at period end; office space was provided without charge.
• Management concluded disclosure controls and internal control over financial reporting were ineffective, citing no functioning audit committee, inadequate segregation of duties, and ineffective period-end reporting controls. It said remediation was under review.
• The filing reports no pending legal proceedings, no new equity transactions during the nine months, and no specific guidance or quantified outlook.

Important Facts for Investors to Verify

1. Confirm the registrant’s identity and the relationship, if any, to Odysight.Ai Inc.; this filing names Intellisense Solutions Inc.
2. Verify whether the company obtained financing after the filing date and whether it can meet obligations and continue as a going concern.
3. Confirm the status, enforcement, and accrued interest of the two defaulted notes.
4. Assess whether the reported nine-month profit is being appropriately understood as driven by a one-time $50,000 merger termination fee rather than revenue-generating operations.
5. Review remediation of the disclosed material weaknesses and the related-party fees paid to Eventus.