Business context and reporting period
Filing identity mismatch: The request identifies Odysight.Ai Inc., but the supplied Form 10-Q is for ScoutCam Inc. (formerly Intellisense Solutions Inc.). This summary reflects the filing provided, for the quarter and nine months ended September 30, 2021; the interim financial statements are unaudited. Unless noted, amounts are in U.S. dollars and financial-statement figures are in thousands.
ScoutCam develops miniaturized imaging and AI-based monitoring solutions for medical, defense, aerospace, automotive, energy, and industrial applications. Management reported completing R&D on a customer-specific project and transitioning to production under a contract with a Fortune 500 multinational healthcare company. The filing reflects a 1-for-9 reverse stock split effective August 9, 2021.
Financial performance and position
| Metric | Three months ended Sept. 30, 2021 | Three months ended Sept. 30, 2020 | Nine months ended Sept. 30, 2021 | Nine months ended Sept. 30, 2020 |
|---|---|---|---|---|
| Revenue | $23 | $12 | $321 | $86 |
| Cost of revenue | $211 | $153 | $821 | $434 |
| Gross loss | $(188) | $(141) | $(500) | $(348) |
| Operating loss | $(2,563) | $(1,028) | $(6,250) | $(3,473) |
| Net loss | $(2,562) | $(1,027) | $(6,256) | $(3,410) |
| Basic and diluted loss per share | $(0.37) | $(0.27) | $(1.05) | $(1.00) |
| Operating cash flow | $(1,786) | $(433) | $(4,704) | $(2,710) |
For the nine-month period, revenue increased 273%, including approximately $200 of revenue from A.M. Surgical. Gross losses persisted because cost of revenue exceeded revenue. R&D, sales and marketing, and G&A expenses rose to $1,350, $472, and $3,931, respectively. Management attributed higher costs to increased hiring and development, production-transition costs, expanded marketing, patent-related activity, share-based compensation, and a $229 VAT-audit provision.
At September 30, 2021, cash and cash equivalents were $19,725, versus $3,373 at December 31, 2020. Current assets were $20,426 and current liabilities $1,106. Total assets were $23,602; total liabilities were $3,000; and shareholders’ equity was $20,602. Liabilities included $1,377 of non-current contract liabilities and $406 of operating lease liabilities. The filing presents no separate conventional interest-bearing debt balance.
Nine-month investing cash outflow was $483, principally for property and equipment. Financing provided $21,527, including approximately $19,118 from a share-and-warrant issuance and $2,459 from warrant exercises. Cash increased by $16,340 during the period. The March 2021 offering issued 2,469,156 shares and warrants for aggregate stated consideration of $20 million; the warrants have a $10.35 exercise price and expire in 2026.
Material changes, outlook, and risks
- Compared with the prior-year nine-month period, net loss grew from $3,410 to $6,256, and operating cash use increased from $2,710 to $4,704. Revenue grew from a low base, but gross loss also widened.
- Management said September 30 cash was expected to fund the operating plan for more than 12 months from issuance of the statements. It also said additional financing would be needed to meet growth targets and continue operations until profitability. Management expects R&D and selling and marketing expenses to increase; no specific revenue or earnings guidance was provided.
- Remaining performance obligations were $2.7 million, expected to be recognized over the manufacturing term of a product under development. Timing and realization depend on the contract and production progress.
- An Israeli VAT audit for 2019–2021 resulted in an approximately $229 provision; the company intends to object. The filing says COVID-19 had no material adverse effect on results or financial position as of September 30, 2021.
- Options granted during the nine months had estimated grant-date fair value of approximately $3,909, to be recognized over vesting periods; $1,317 of share-based compensation was recorded in the period. Outstanding warrants and options create potential dilution.
- The company reported no material change to the risk factors in its 2020 Form 10-K, no material pending legal proceedings, and effective disclosure controls as of quarter-end. It reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is ScoutCam Inc., not Odysight.Ai Inc.
- Review subsequent filings for cash burn, financing needs, and whether management’s stated runway and growth plans remain current.
- Verify progress, customer terms, and revenue recognition for the healthcare production contract and the $2.7 million of remaining performance obligations.
- Check the outcome of the VAT-audit objection and any resulting change to the recorded provision.
- Assess dilution from outstanding warrants and options, including exercises after September 30, 2021; the filing reports 6,929,517 shares outstanding at quarter-end and 7,121,737 as of November 15, 2021.