Odysight.ai Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited consolidated financial statements; amounts below are in USD thousands unless noted.
Business context and financial performance
Odysight.ai develops image-based platforms using resilient cameras and AI for predictive maintenance and condition monitoring, with applications in sectors including aerospace, energy, automotive and maritime, as well as certain medical devices. Management said it expanded its focus on Industry 4.0 research and development and added employees to support anticipated workload and product development.
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $187 | $303 |
| Cost of revenue | $410 | $550 |
| Gross loss | ($223) | ($247) |
| Research and development | $1,567 | $1,398 |
| Sales and marketing | $234 | $176 |
| General and administrative | $1,340 | $958 |
| Operating loss | ($3,364) | ($2,779) |
| Financing income, net | $202 | $86 |
| Net loss | ($3,162) | ($2,686) |
| Basic and diluted loss per share | ($0.30) | ($0.37) |
Gross margin was negative in both periods; the gross loss equaled about 119% of revenue in Q1 2024 versus 82% in Q1 2023. Revenue fell 38%, while cost of revenue decreased 25%. R&D rose 12%, sales and marketing 33%, and G&A 40%; operating loss widened 21%. Management attributed the revenue decline mainly to lower unit sales and the expense increases to hiring and expanded development, patent and professional-service costs, and new office costs.
Cash flow, liquidity and balance sheet
- Operating cash use was $1,230, compared with $2,474 in Q1 2023. Investing cash use was $22, versus $12,015, largely reflecting the prior-year placement of funds in short-term deposits. No financing cash was raised in Q1 2024; Q1 2023 financing provided $13,977 from share and warrant issuance.
- At March 31, 2024, cash and cash equivalents were $7,362, restricted cash $310, and short-term deposits $8,228. Cash, restricted cash and deposits together totaled about $15.9 million. Cash and cash equivalents plus short-term deposits were about $15.6 million.
- Total assets were $20,541, total liabilities $5,396, and shareholders’ equity $15,145. Current assets of $17,189 exceeded current liabilities of $2,670. The filing reports no borrowings; liabilities include lease and contract liabilities.
- Accumulated deficit was $37,369. Common shares outstanding at March 31 were 10,446,685. The company also reported 5,763,273 outstanding warrants and 2,455,069 options, which may dilute shareholders if exercised.
Material changes, outlook and risks
Revenue from products was $81 versus $197 in Q1 2023; development-services revenue from Customer A was $106 in each period. The filing says a substantial portion of revenue comes from a limited number of customers. Management expects R&D, selling and marketing, commercialization, manufacturing, distribution and public-company costs to increase.
Management believes available cash and short-term deposits can fund the operating plan for at least 12 months from the filing date, but says substantial additional funding will be needed to continue operations and that the company is likely to remain unprofitable for the foreseeable future. Future financing may be unavailable or on unfavorable terms and could dilute shareholders; without funding, the company may need to delay, reduce or eliminate development or commercialization efforts.
Remaining performance obligations were $2.2 million at March 31, expected to be recognized over the product’s estimated manufacturing term. The company’s Israel Innovation Authority grant carries conditional royalties of 3% up to the grant funding and accrued interest if the supported enhancements are completed and generate sales; the filing says repayment is not required if plans are abandoned or generate no sales. Management reported no material change to the risk factors in its 2023 Form 10-K, no material pending legal claims, and no subsequent events identified through issuance. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Customer concentration, the pace of product sales and the basis for management’s anticipated workload and growth in Industry 4.0 markets.
- Cash runway assumptions, expected operating and commercialization spending, and the timing and terms of any required financing.
- Revenue-recognition timing for the $2.2 million of remaining performance obligations and the estimated seven-year manufacturing term used for certain Customer A revenue.
- Potential dilution from outstanding warrants, options and future equity financing, and any obligations arising under the Israel Innovation Authority grant.