Odysight.ai Inc. — FY2023 Form 10-K
Reporting period: Year ended December 31, 2023; filed March 26, 2024. Although the request references 2023 Q4, this filing reports full-year results and does not provide a clear standalone fourth-quarter income statement. Amounts below are U.S. dollars; financial-statement amounts are shown in millions unless noted.
Business context
Odysight.ai develops miniature visual-sensing hardware and AI/video analytics for predictive maintenance and condition monitoring in aerospace, defense, industrial and other markets, alongside medical-device applications. In 2023, most revenue came from production and development work for one Fortune 500 healthcare customer. The company is expanding research and commercial efforts in industrial and aerospace applications.
Financial performance and liquidity
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Revenue | $3.033M | $0.665M | Up 356%; increase primarily reflected more customer units sold and a higher negotiated unit price. |
| Cost of revenue | $2.524M | $1.631M | Up 55%; higher volume partly offset by lower production scrap. |
| Gross profit (loss) | $0.509M | ($0.966M) | Gross margin approximately 16.8%, versus approximately -145.3%. |
| Operating expenses | R&D $5.602M; sales and marketing $1.109M; G&A $4.431M | R&D $4.197M; sales and marketing $0.699M; G&A $3.577M | All three categories increased, principally reflecting hiring, expanded R&D, commercial activity and professional/patent costs. |
| Operating loss | ($10.633M) | ($9.439M) | Loss widened 13%. |
| Net loss | ($9.445M) | ($9.468M) | Nearly unchanged; FY2023 included $0.988M net financing income versus $0.059M financing expense in FY2022. |
| Operating cash flow | ($10.009M) | ($6.095M) | Higher cash use, including increased receivables and lower contract liabilities. |
| Investing cash flow | ($5.113M) | $7.882M | Primarily net investment in short-term deposits in FY2023. |
| Financing cash flow | $13.809M | $0 | Primarily proceeds from the 2023 private placement. |
At year-end, cash and cash equivalents were $8.945M and short-term deposits were $8.096M, totaling about $17.0M. Current assets were $19.349M and current liabilities $2.082M. Total liabilities were $5.022M, including $1.326M in operating lease liabilities; the filing reports no borrowings in the presented balance sheet. Accumulated deficit was $34.207M.
The March 2023 private placement raised approximately $14M by issuing 3,294,117 shares and warrants to purchase an equal number of shares at $5.50 per share. The warrants were exercisable immediately and expire in March 2026, creating potential dilution.
Material changes and outlook
- Revenue concentration remains extreme: Customer A represented approximately 98% of FY2023 revenue ($2.977M), compared with $0.538M, or approximately 81%, in FY2022. The company disclosed a formal $3.3M purchase-order commitment from this customer for FY2024.
- Contract liabilities declined from $3.644M to $2.322M; remaining performance obligations were $2.3M at year-end, expected to be recognized over the product’s manufacturing term.
- Management said existing cash and short-term deposits were expected to fund operations for at least 12 months from the financial-statement filing date. It also expects higher R&D, commercialization and operating costs, anticipates continued losses, and says additional funding will be needed; no assurance is given that financing will be available on acceptable terms.
- Management expects R&D and selling/marketing spending to rise as the company develops and commercializes Industry 4.0 solutions. No quantified earnings or revenue guidance is provided.
- After year-end, the company announced a purchase order for an Apache helicopter prototype (February 2024) and a purchase order exceeding $1M for a Seahawk program (March 2024). These are subsequent developments, not FY2023 revenue.
Risks, contingencies and unusual items
- Customer and commercialization risk: dependence on one healthcare customer, limited operating history, ongoing losses, and uncertainty converting demonstrations, partnerships and defense interest into recurring sales.
- Israel and supply-chain exposure: management reported minor work disruptions from the Israel-Hamas war and no material adverse effect to date, but escalation, reservist call-ups, shipping disruption or supplier interruptions could affect operations.
- Government grant obligations: IIA-funded technology is subject to restrictions on transfer and manufacturing outside Israel and may require approvals, royalties or repayment. A grant supporting production capabilities has a maximum amount of NIS 1M, subject to milestones; the filing also describes generally applicable royalty terms.
- Intellectual property: European patents in one family were revoked on appeal in early 2024, with formal decisions pending; a related U.S. patent was under reexamination. The company said the European revocations were not expected to materially affect current operations. EU trademark oppositions also remain pending.
- Other financial considerations: $1.664M of stock-based compensation was recognized in FY2023. The company maintains a full valuation allowance against deferred tax assets, including approximately $25.006M of tax-loss carryforwards.
- The independent auditor issued an unqualified opinion on the financial statements. Management assessed internal control over financial reporting as effective; the auditor did not attest to internal-control effectiveness.
Investor verification priorities
- Verify the status, timing and collectability of the $3.3M FY2024 healthcare-customer commitment and the post-year-end defense orders.
- Assess how quickly the company is using its approximately $17.0M cash and deposits relative to operating cash burn, planned investment and its stated need for future funding.
- Review customer concentration, contract liabilities and the schedule and assumptions for recognizing the $2.3M remaining performance obligations.
- Evaluate potential dilution from outstanding warrants and options, including the 5.76M warrants outstanding at December 31, 2023.
- Track the patent reexamination and EU trademark proceedings, IIA grant milestones and restrictions, and any effect of regional conflict on staffing, supply and customer programs.