ScoutCam Inc. — Q1 2022 Form 10-Q
Period: Three months ended March 31, 2022. The filing is by ScoutCam Inc. (not Odysight.Ai Inc.); financial statement amounts are in U.S. dollars, generally in thousands unless noted.
Business context
ScoutCam develops image-based inspection and monitoring platforms using compact cameras and AI analysis. Management said it was expanding research and development for Industry 4.0 applications, including predictive maintenance and condition-based monitoring in aviation, energy, automotive and other industrial sectors.
Financial results and liquidity
- Revenue: $2,000, down 92% from $24,000 in Q1 2021. The company attributed the decline primarily to lower component-product sales to occasional customers.
- Gross loss: $286,000, versus $179,000; cost of revenue rose 42% to $288,000. Revenue was insufficient to cover cost of revenue.
- Operating loss: $2.769 million, up 74% from $1.590 million. Net loss was $2.788 million, compared with $1.606 million. Basic and diluted loss per share was $0.39 versus $0.38; weighted-average shares increased to 7.122 million from 4.222 million.
- Expenses: R&D rose 240% to $954,000; sales and marketing rose 23% to $243,000; general and administrative expenses rose 38% to $1.286 million. Stock-based compensation was $772,000.
- Cash flow: Operating cash use was $224,000, versus $774,000 used a year earlier; investing cash use was $24,000, versus $117,000. No financing cash was raised in Q1 2022, compared with $10.281 million of financing inflows in Q1 2021. Operating cash use was partly offset by a $1.616 million increase in contract liabilities.
- Liquidity and obligations: At March 31, cash and cash equivalents were $8.292 million and short-term deposits were $11.026 million. Current assets totaled $19.938 million and current liabilities $2.342 million. Total liabilities were $5.621 million, including $4.036 million of contract liabilities and $433,000 of operating lease liabilities; the filing reports no borrowings or other conventional debt.
- Equity: Accumulated deficit was $18.082 million and shareholders’ equity was $17.600 million. Shares issued and outstanding were 7,121,737.
Material changes and outlook
- Management linked higher operating costs to increased hiring and stock-based compensation, expanded R&D activity, materials and subcontractors, and additional office space. It expects R&D and sales and marketing expenses to increase as development and commercialization efforts continue.
- Remaining performance obligations were approximately $4 million, expected to be recognized over the expected manufacturing term of the product under development. Contract liabilities increased from $2.420 million at year-end 2021 to $4.036 million.
- Management believed existing cash and short-term deposits would fund anticipated needs for at least 12 months from the financial-statement issuance date. It also said substantial additional funding would be needed for continuing operations; future financing may dilute shareholders, and the company expects to remain unprofitable for the foreseeable future.
- The company reported an accumulated deficit of approximately $18.1 million since inception. It said COVID-19 had no material adverse impact on results or financial position as of March 31, 2022. No material legal proceedings or subsequent events were identified, and management reported disclosure controls were effective.
Important facts for investors to verify
- Confirm the filing entity and period: this report identifies the registrant as ScoutCam Inc. and covers Q1 2022.
- Assess the company’s ability to convert its approximately $4 million of performance obligations into recognized revenue and cash, given Q1 revenue of only $2,000.
- Review cash runway assumptions, expected spending increases, and the timing and terms of any additional financing.
- Evaluate the impact of stock-based compensation and potential dilution, including outstanding warrants and options.