Business context and reporting period
This is ScoutCam Inc.’s Form 10-K for the fiscal year ended December 31, 2022, filed March 28, 2023. The request identifies Odysight.Ai Inc., but the filing itself names ScoutCam Inc.; confirm the issuer identity and any subsequent name change. ScoutCam develops miniature video sensing and AI-based monitoring solutions for medical devices and industrial predictive and condition-based maintenance. It reported one operating segment and described a B2B model. Medical applications generated a substantial share of revenue.
Financial performance and liquidity
Amounts below are in U.S. dollars; financial statement figures are in thousands unless indicated otherwise.
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $665,000 | $387,000 |
| Cost of revenue | $1.631 million | $1.108 million |
| Gross loss | $966,000 | $721,000 |
| Research and development | $4.197 million | $2.002 million |
| Sales and marketing | $699,000 | $908,000 |
| General and administrative | $3.577 million | $5.481 million |
| Operating loss | $9.439 million | $9.112 million |
| Net loss | $9.468 million | $8.987 million |
| Cash used in operating activities | $6.095 million | $5.886 million |
Revenue increased 72%, primarily from the Fortune 500 healthcare customer project. Revenue included $317,000 of development-services revenue and $348,000 of product revenue. Gross loss widened, and the company remained materially unprofitable. Basic and diluted net loss per share was $1.33, versus $1.44 in 2021.
At year-end, cash and cash equivalents were $10.099 million and short-term deposits were $3.047 million, for combined cash and deposits of approximately $13.1 million, down from approximately $19.6 million. Current assets were $14.117 million and current liabilities $2.559 million. Total liabilities were $5.109 million, including lease and contract liabilities; the filing does not show conventional borrowings. Accumulated deficit was $24.762 million. Management said available funds were expected to support at least 12 months of operations, while also stating that additional funding would be needed to continue operations through profitability.
Material changes versus the prior year
- Revenue rose $278,000, led by approximately $538,000 from Customer A, a Fortune 500 healthcare company; there was no Customer A revenue in 2021. A.M. Surgical revenue fell from approximately $199,000 to zero.
- R&D spending more than doubled as the company expanded staffing and work on Industry 4.0 applications. Management expected R&D and I4.0 sales and marketing spending to increase.
- G&A declined 35%, including lower patent and stock-based compensation costs and a $129,000 reversal associated with settling a prior VAT assessment.
- Operating loss increased 4%, while operating cash use increased by $209,000. No financing cash was raised during 2022; 2021 financing inflows were $22.559 million.
- Remaining performance obligations were $3.644 million at year-end, versus $2.420 million a year earlier. The company expected recognition over the estimated seven-year manufacturing term for the customer product.
Outlook, risks and unusual items
The filing provides no numerical revenue or earnings guidance. Management anticipated continued losses and increased investment in R&D, commercialization, sales, manufacturing and distribution. It cited the March 2023 $14 million private placement as a source of subsequent financing: 3,294,117 units were sold at $4.25 each, each comprising one common share and a three-year warrant exercisable at $5.50. The transaction occurred after year-end and therefore is not reflected in the December 31, 2022 balance sheet.
- Customer concentration is significant: Customer A accounted for $538,000, approximately 81% of 2022 revenue, and was expected to provide most near-term forecast revenue. The company disclosed receiving a $1.45 million order from this customer in January 2023.
- The company has a history of operating losses and negative gross profit and depends on future funding, commercialization and market acceptance. Additional equity financing could dilute existing holders.
- Supply-chain dependence includes a limited, in some cases single, source for miniature CMOS sensors. Manufacturing capacity and supplier availability may constrain delivery.
- Patent risk includes European opposition proceedings and U.S. reexamination of a patent; decisions were expected in 2024. Israeli Innovation Authority rules can restrict transfer of funded know-how and manufacturing outside Israel and may require approval or payments.
- Other identified risks include regulatory approvals, competition, geopolitical and security conditions in Israel, foreign-exchange exposure, cybersecurity, and dependence on skilled employees.
- Revenue accounting included recognition of previously deferred development revenue and related costs over the estimated seven-year production term after the project moved into production in 2022. The filing reports $317,000 of such revenue and $180,000 of related cost recognition.
- 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 that assessment.
Important facts for investors to verify
- Confirm whether ScoutCam Inc. is the intended issuer for this request and reconcile its identity with Odysight.Ai Inc.
- Review the Fortune 500 customer contract, the $1.45 million order, customer concentration, and the timing and conditions for recognizing the $3.644 million of remaining obligations.
- Assess cash burn, the assumptions behind management’s stated 12-month runway, and the impact of the March 2023 financing, warrants and resulting dilution.
- Track whether the company can improve gross margins and convert development projects and demonstrations into recurring commercial revenue.
- Check the outcomes of the patent proceedings, supplier arrangements for critical sensors, and any restrictions or potential payments tied to Israeli Innovation Authority-funded technology.