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SCTC Scoutcam Inc (QB)

2.70
0.00 (0.00%)
14 Jun 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type
Scoutcam Inc (QB) USOTC:SCTC OTCMarkets Common Stock
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 2.70 2.07 3.36 0.00 01:00:00

Quarterly Report (10-q)

14/11/2022 9:37pm

Edgar (US Regulatory)


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                           to                              

 

Commission File No. 333-188920

 

SCOUTCAM INC.
(Exact name of registrant as specified in its charter)

 

Nevada   47-4257143

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

Suite 7A, Industrial Park    
P.O. Box 3030, Omer, Israel   8496500
(Address of Principal Executive Offices)   (Zip Code)

 

+972 73 370-4691
(Registrant’s telephone number, including area code)

 

 
(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of exchange on which registered
N/A   N/A   N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of November 14, 2022, the registrant had 7,121,737 shares of common stock, par value $0.001, of the registrant issued and outstanding.

 

As used in this Quarterly Report and unless otherwise indicated, the terms “ScoutCam,” “we,” “us,” “our,” or “our Company” refer to ScoutCam Inc. Unless otherwise specified, all dollar amounts are expressed in United States dollars.

 

 

 

 

 

 

SCOUTCAM INC.

 

QUARTERLY REPORT ON FORM 10-Q

 

TABLE OF CONTENTS

 

  Page
   
Cautionary Note Regarding Forward-Looking Statements 3
   
PART 1-FINANCIAL INFORMATION  
     
Item 1. Consolidated Financial Statements (unaudited) 4
     
  Consolidated Balance Sheets 5
     
  Consolidated Statements of Comprehensive Loss 7
     
  Statements of Stockholders’ Equity 8
     
  Consolidated Statements of Cash Flows 10
     
  Notes to Consolidated Financial Statements 12
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 26
     
Item 4. Control and Procedures 26
   
PART II-OTHER INFORMATION  
     
Item 1A. Risk Factors 27
     
Item 6. Exhibits 27
   
SIGNATURES 28

 

- 2 -
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events.

 

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended December 31, 2021 (filed on March 30, 2022) entitled “Risk Factors” as well as in our other public filings.

 

In light of these risks and uncertainties, and especially given the start-up nature of our business, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

- 3 -
 

 

Item 1. Financial Statements

 

ScoutCam INC.

INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2022

 

CONSOLIDATED SCOUTCAM INC.

 

  Page
Interim Condensed Consolidated Financial Statements - in US Dollars (USD) in thousands  
Interim Condensed Consolidated Balance Sheets (unaudited) 5
Interim Condensed Consolidated Statements of Operations (unaudited) 7
Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 8
Interim Condensed Consolidated Statements of Cash Flows (unaudited) 10
Notes to the Interim Condensed Consolidated Financial Statements 12

 

- 4 -
 

 

SCOUTCAM INC.

 

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2022   2021 
   Unaudited   Audited 
   USD in thousands 
Assets        
         
CURRENT ASSETS:          
Cash and cash equivalents   2,586    8,581 
Short terms deposits   12,579    11,013 
Accounts receivable   15    8 
Inventory   652    167 
Other current assets   272    443 
Total current assets   16,104    20,212 
           
NON-CURRENT ASSETS:          
Contract fulfillment assets   1,555    1,675 
Property and equipment, net   708    781 
Operating lease right-of-use assets   325    482 
Severance pay asset   325    396 
Total non current assets   2,913    3,334 
           
TOTAL ASSETS   19,017    23,546 

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

- 5 -
 

 

SCOUTCAM INC.

 

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

 

   September 30,   December 31, 
   2022   2021 
   Unaudited   Audited 
   USD in thousands 
Liabilities and shareholders’ equity          
           
CURRENT LIABILITIES:          
Accounts payables   366    103 
Contract liabilities - short term   1,429    346 
Operating lease liabilities - short term   192    256 
Accrued compensation expenses   352    355 
Related parties   67    39 
Other accrued expenses   150    210 
Total current liabilities   2,556    1,309 
NON-CURRENT LIABILITIES:          
Contract liabilities - long term   2,324    2,074 
Operating lease liabilities - long term   85    203 
Liability for severance pay   324    344 
Total non current liabilities   2,733    2,621 
TOTAL LIABILITIES   5,289    3,930 
           
SHAREHOLDERS’ EQUITY:          
Common stock, $0.001 par value; 300,000,000 shares authorized as of September 30, 2022 and December 31, 2021, 7,121,737 shares issued and outstanding as of September 30, 2022 and December 31, 2021   7    7 
Additional paid-in capital   36,819    34,903 
Accumulated deficit   (23,098)   (15,294)
TOTAL SHAREHOLDERS’ EQUITY   13,728    19,616 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   19,017    23,546 

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

- 6 -
 

 

SCOUTCAM INC.

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

   2022   2021   2022   2021 
   Nine months ended   Three months ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
   Unaudited 
   USD in thousands (except per share data) 
     
Revenues   506    321    134    23 
Cost of revenues   1,279    821    430    211 
Gross Loss   (773)   (500)   (296)   (188)
Research and development expenses   3,023    1,193    1,048    550 
Sales and marketing expenses   617    629    171    225 
General and administrative expenses   3,262    3,931    810    1,603 
Operating loss   (7,675)   (6,253)   (2,325)   (2,566)
Other income   23    3    8    3 
Financing income (expenses), net   (152)   (6)   73    1 
Net Loss   (7,804)   (6,256)   (2,244)   (2,562)

Net loss per ordinary share (basic and diluted, USD)

   (1.10)   (1.05)   (0.32)   (0.37)

Weighted average ordinary shares (basic and diluted, in thousands)

   7,122    5,968    7,122    6,930 

 

- 7 -
 

 

SCOUTCAM INC.

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

 

Nine Months Ended September 30, 2022 (Unaudited)

 

   Number   Amount   capital   deficit   Equity 
   Ordinary shares  

Additional

paid-in

   Accumulated  

Total

Shareholders’

 
   Number   Amount   capital   deficit   Equity 
   In thousands   USD in thousands 
Balance at January 1, 2022   7,122    7    34,903    (15,294)   19,616 
Stock based compensation   -    -    1,916    -    1,916 
Net loss   -    -    -    (7,804)   (7,804)
                          
Balance at September 30, 2022   7,122    7    36,819    (23,098)   13,728 

 

Three Months Ended September 30, 2022 (Unaudited)

 

   Ordinary shares  

Additional

paid-in

   Accumulated  

Total

Shareholders’

 
   Number   Amount   capital   deficit   Equity 
   In thousands   USD in thousands 
Balance at July 1, 2022   7,122    7    36,360    (20,854)   15,513 
Stock based compensation   -    -    459         459 
Net loss   -    -    -    (2,244)   (2,244)
                          
Balance at September 30, 2022   7,122          7    36,819    (23,098)   13,728 

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

- 8 -
 

 

Nine Months Ended September 30, 2021 (Unaudited)

 

   Ordinary shares  

Additional

paid-in

   Accumulated  

Total

Shareholders’

 
   Number   Amount   capital   deficit   equity 
   In thousands   USD in thousands 
Balance at January 1, 2021   4,084    4    10,267    (6,307)   3,964 
Issuance of shares and warrants   2,469    2    19,116    -    19,118 
Stock based compensation   -    -    1,317    -    1,317 
Exercise of warrants   375    1    2,458    -    2,459 
Round up shares due to reverse stock split   1    *    -    -    - 
Net loss   -    -    -    (6,256)   (6,256)
                          
Balance at September 30, 2021   6,929    7    33,158    (12,563)   20,602 

 

Three Months Ended September 30, 2021 (Unaudited)

 

   Ordinary shares  

Additional

paid-in

   Accumulated  

Total

Shareholders’

 
   Number   Amount   capital   deficit   Equity 
   In thousands   USD in thousands 
Balance at July 1, 2021   6,929    7    32,476    (10,001)   22,482 
Stock based compensation   -    -    682    -    682 
Net loss   -    -    -    (2,562)   (2,562)
                          
Balance at September 30, 2021   6,929           7    33,158    (12,563)   20,602 

 

* Represents an amount less than $1 thousand

 

- 9 -
 

 

SCOUTCAM INC.

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   2022   2021   2022   2021 
   Nine months ended   Three months ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
   Unaudited 
   USD in thousands 
                 
CASH FLOWS FROM OPERATING ACTIVITIES:                    
Net loss   (7,804)   (6,256)   (2,244)   (2,562)
Adjustments to reconcile net loss to net cash used in operations:                    
Depreciation   160    63    57    24 
Changes in severance pay asset, net   51    (56)   -    - 
Share based compensation   1,916    1,317    459    682 
Profit from exchange differences from operating lease liability   (52)   -    (2)   - 
Loss (Profit) from exchange differences on cash and cash equivalents   301    (12)   (26)   (8)
Interest income in respect of deposits   (66)   -    (43)   - 
                     
CHANGES IN OPERATING ASSET AND LIABILITY ITEMS:                    
Decrease (increase) in accounts receivable   (7)   (2)   84    41 
Decrease (increase) in inventory   (485)   99    (43)   - 
Decrease in operating lease liability   (183)   -    (58)   - 
Decrease in ROU asset   210    -    78    - 
Increase in related parties   28    72    45    12 
Decrease (increase) in other current assets   171    (170)   138    339 
Increase (decrease) in account payables   263    122    57    (102)
Decrease (increase) in contract fulfillment assets   120    (504)   60    (124)
Increase (decrease) in contract liabilities   1,333    529    (102)   (8)
Increase (decrease) in accrued compensation expenses   (3)   34    (24)   (26)
Increase (decrease) in other accrued expenses   (60)   60    (145)   82 
Net cash flows used in operating activities   (4,107)   (4,704)   (1,709)   (1,650)
                     
CASH FLOWS FROM INVESTING ACTIVITIES:                    
                     
Purchase of property and equipment   (87)   (483)   (45)   (313)
Withdrawal of short terms deposits   5,000    -    -    - 
Investment in short term deposits   (6,500)   -    (3,000)   - 
Net cash flows provided by (used in) investing activities   (1,587)   (483)   (3,045)   (313)
                     
CASH FLOWS FROM FINANCING ACTIVITIES:                    
Issuance expenses   -    (50)   -    (95)
Proceeds from exercise of warrants   -    2,459    -    - 
Proceeds from issuance of shares and warrants   -    19,118    -    - 
Net cash flows provided by financing activities   -    21,527    -    (95)
                     
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (5,694)   16,340    (4,754)   (2,058)
PROFIT (LOSS) FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS   (301)   12    26    8 
BALANCE OF CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD   8,581    3,373    7,314    21,775 
BALANCE OF CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD   2,586    19,725    2,586    19,725 

 

- 10 -
 

 

Non cash activities -

 

   Nine months ended   Three months ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
   Unaudited 
   USD in thousands 
Non cash activities                
Issuance expenses   -    45    -    

-

 
Right-of-use assets obtained in exchange for operating lease liabilities   118    423    37   64 
Termination of right-of-use assets in exchange for cancellation of operating lease obligations   (65)   -    (65)   - 
Increase in property and equipment through a decrease in advances to suppliers   -    31    -    31 

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

- 11 -
 

 

SCOUTCAM INC.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – GENERAL:

 

  a.

ScoutCam Inc. (the “Company”), formerly known as Intellisense Solutions Inc., (“Intellisense”), was incorporated under the laws of the State of Nevada on March 22, 2013. Prior to the closing of the Exchange Agreement (as defined below), the Company was a non-operating “shell company”.

 

The Company’s wholly owned subsidiary, ScoutCam Ltd. (“ScoutCam”), was formed in the State of Israel on January 3, 2019, as a wholly-owned subsidiary of Medigus Ltd. (“Medigus”), an Israeli company traded on the Nasdaq Capital Market, and commenced operations on March 1, 2019.

 

In December 2019, Medigus and ScoutCam consummated an asset transfer agreement, under which Medigus transferred and assigned certain assets and intellectual property rights related to its miniaturized imaging business to ScoutCam.

 

On December 30, 2019, Intellisense and Medigus consummated a securities exchange agreement (the “Exchange Agreement”), pursuant to which Medigus delivered 100% of its holdings in ScoutCam to Intellisense in exchange for shares of Intellisense’s common stock representing 60% of the issued and outstanding share capital of Intellisense immediately upon the consummation of the Exchange Agreement.

 

As of September 30, 2022, Medigus beneficially owned 27.02% of the Company’s outstanding common stock.

 

The Company, through ScoutCam, provides image-based platforms. Through the use of its proprietary visualization technology, ScoutCam offers solutions across predictive maintenance and condition-based monitoring markets, in sectors such as energy, automotive and aviation. ScoutCam’s solutions are based on small and highly resilient cameras, specialized AI analysis and supplementary technologies.

 

- 12 -
 

 

SCOUTCAM INC.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – GENERAL (continued):

 

  b. On August 9, 2021, the Company amended its Articles of Incorporation to effect a nine-to-one reverse stock split of its outstanding Common Stock. As a result of the reverse stock split, every nine shares of the Company’s outstanding Common Stock were combined and reclassified into one share of the Company’s Common Stock. No fractional shares were issued in connection with or following the reverse split. The amount of authorized capital of the Company’s Common Stock and par value of such shares remained unchanged. All share, stock option and per share information in these interim consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis.
     
  c. Since incorporation of the Company and through September 30, 2022, the Company accumulated a deficit of $23,098 thousand and its activities have been funded mainly by its shareholders. The Company’s management believes the Company’ cash and cash resources as of September 30, 2022 will enable the Company to fund its operating plan for more than 12 months from the date of issuance of these financial statements. The Company expects to continue to incur significant research and development expenses and other costs related to its ongoing operations and, as a result, will need to obtain additional funding in order to continue its future operations.
     
  d. In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on its operations and determined that there were no material adverse impacts on the Company’s results of operations and financial position as of September 30, 2022. These estimates may change, as new events occur, and additional information is obtained.

 

NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

 

  a. Unaudited Interim Financial Statements

 

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Group’s Annual Report on Form 10-K for the year ended December 31, 2021.

 

  b. Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.

 

  c. Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, inventory impairment, stock based compensation, as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates.

 

- 13 -
 

 

SCOUTCAM INC.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued):

 

  d. Significant Accounting Policies

 

The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements.

 

As described therein, to the extent development services are not distinct from the performance obligation relating to the subsequent production phase, revenue from these services is deferred until commencement of the production phase. Further to the inception of the production phase (refer to Note 5), the Company recognizes deferred development services over the expected term of production.

 

  e. Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Group’s condensed consolidated financial statements.

 

NOTE 3 – LEASES:

 

On September 30, 2022, the Group’s ROU assets and lease liabilities for operating leases totaled $325 thousand and $277 thousand, respectively.

 

In December 2020, ScoutCam entered into a lease agreement for office space in Omer, Israel. The agreement is for 36 months beginning on January 1, 2021.

 

In March 2021, ScoutCam entered into a lease agreement for additional office space in Omer, Israel. The agreement is until December 31, 2023. Monthly lease payments under the agreements are approximately $12 thousand.

 

Lease expenses recorded in the interim consolidated statements of operations were $203 thousand for the nine months ended September 30, 2022.

 

ScoutCam subleases part of the office space to a third party for approximately $3 thousand for month.

 

Supplemental cash flow information related to operating leases was as follows:

 

  

Nine months ended

September 30, 2022

 
   USD in thousands 
Cash payments for operating leases   203 
Total lease expenses   203 

 

As of September 30, 2022, the Company’s operating leases had a weighted average remaining lease term of 0.47 years and a weighted average discount rate of 6%. Future lease payments under operating leases as of September 30, 2022 were as follows:

 

   Operating leases 
   USD in thousands 
Remainder of 2022   52 
2023   194 
2024   40 
2025   6 
Total future lease payments   292 
Less imputed interest   (15)
Total lease liability balance   277 

 

- 14 -
 

 

SCOUTCAM INC.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 4 – EQUITY:

 

Warrants:

 

As of September 30, 2022, the Company had the following outstanding warrants to purchase common stock:

 

Warrant   Issuance Date  Expiration Date 

Exercise Price

Per Share ($)

  

Number of Shares

of common stock

Underlying

Warrants

 
                

March 2021 Warrant

   March 29, 2021  March 31, 2026   10.350    2,469,156 
                2,469,156 

 

In addition, if the Company achieves an aggregate amount of $33 million in sales within the first three years immediately after the Exchange Agreement, the Company will issue to Medigus 298,722 shares of the Company’s common stock, which represents 10% of the Company’s issued and outstanding share capital as of the Exchange Agreement.

 

- 15 -
 

 

SCOUTCAM INC.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 4 – EQUITY (continued):

 

Share-based compensation to employees, directors and service providers:

 

In February 2020, the Company’s Board of Directors approved the 2020 Share Incentive Plan (the “Plan”). The Plan initially included a pool of 580,890 shares of common stock for grant to Company employees, consultants, directors and other service providers. On March 15, 2020, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the Plan by an additional 64,099 shares of common stock.

 

On June 22, 2020, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the Plan by an additional 401,950 shares of common stock. During the second quarter of 2021, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the Plan by an additional 777,778 shares of common stock.

 

The Plan is designed to enable the Company to grant options to purchase shares of common stock and RSUs under various and different tax regimes including, without limitation: (i) pursuant and subject to Section 102 of the Israeli Tax Ordinance or any provision which may amend or replace it and any regulations, rules, orders or procedures promulgated thereunder and to designate them as either grants made through a trustee or not through a trustee; and (ii) pursuant and subject to Section 3 (i) of the Israeli Tax Ordinance.

 

Stock option activity

 

During the nine months ended September 30, 2022, the Company granted 53,000 options pursuant to the Plan.

 

The fair value of each option was estimated as of the date of grant or reporting period using the Black-Scholes option pricing model, using the following assumptions:

 

  

Nine months

ended

September 30,
2022

 
Underlying value of ordinary shares ($)   7.2 
Exercise price ($)   4.5 
Expected volatility (%)   127.62%
Term of the options (years)   7 
Risk-free interest rate   1.98%

 

The cost of the benefit embodied in the options granted during the nine months ended September 30, 2022, based on their fair value as at the grant date, is estimated to be approximately $356 thousand. These amounts will be recognized in statements of operations over the vesting period.

 

- 16 -
 

 

SCOUTCAM INC.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 4 – EQUITY (continued):

 

The following table summarizes stock option activity for the nine months ended September 30, 2022:

 

   For the
Nine months ended
September 30,
2022
 
   Amount of
options
   Weighted
average
exercise price
 
         $ 
Outstanding at beginning of period   1,253,554    3.31 
Granted   53,000    4.50 
Cancelled   (52,569)   3.17 
Outstanding at end of period   1,253,985    3.36 
           
Vested at end of period   748,531    3.03 

 

Restricted stock unit (“RSU”) activity

 

During the nine months ended September 30, 2022, the Company granted 90,000 RSUs pursuant to the Plan.

 

Each RSU will vest based on continued service which is generally over three years. The grant date fair value of the award will be recognized as stock-based compensation expense over the requisite service period. The fair value of restricted stock units was estimated on the date of grant based on the fair value of the Company’s common stock.

 

The cost of the benefit embodied in the RSU granted during the nine months ended September 30, 2022, based on their fair value as at the grant date, is estimated to be approximately $648 thousand. These amounts will be recognized in statements of operations over the vesting period

 

The following table summarizes RSU activity for the nine months ended September 30, 2022:

 

   For the
Nine months ended
September 30,
2022
 
   Amount of RSU   Weighted
Average Grant
Date Fair Value
per Share
 
       $ 
Outstanding at beginning of period   -    - 
Granted   90,000    7.2 
Vested   -    - 
Forfeited   -    - 
Unvested and Outstanding at end of period   90,000    7.2 

 

- 17 -
 

 

SCOUTCAM INC.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 4 – EQUITY (continued):

 

The following table sets forth the total share-based payment expenses resulting from options granted, included in the statements of operation:

 

  

Nine months

ended

September 30,
2022

 
   USD in thousands 
     
Cost of revenues   37 
Research and development   442 
Sales and marketing   134 
General and administrative   1,303 
Total expenses   1,916 

 

NOTE 5 – REVENUES:

 

Contract fulfillment assets and Contract liabilities:

 

The Company’s contract fulfillment assets and contract liabilities as of September 30, 2022 and December 31, 2021 were as follows:

 

   September 30,   December 31, 
   2022   2021 
   USD in thousands 
Contract fulfillment assets   1,555    1,675 
Contract liabilities   3,753    2,420 

 

Contract liabilities include advance payments, which are primarily related to advanced billings for development services.

 

In the second quarter of 2022 the Company completed the development of its miniature camera solution relating to these advanced payments and moved to production. As a result, the Company recognized revenues of $211 thousand during the nine-month period ended September 30, 2022, that were included as deferred development services revenues in the contract liabilities balance, based on the expected manufacturing term of the product. Accordingly, the Company recognized expenses of $120 thousands during the nine-month period ended September 30, 2022, that were included as deferred development services expenses in the contract fulfillment assets balance.

 

In addition, the Company recognized revenues of 222 $ thousands during the nine-month period from the sales of the product.

 

a.The Company’s contract fulfillment assets were as follows:

  

Nine months

ended

September 30,
  

Twelve months

ended

December 31,
 
   2022   2021 
   USD in thousands 
Balance at beginning of year   1,675    1,130 
Additions during the period   -    545 
Additions (expenses) recognized during the period   (120)   - 
Balance at end of period   1,555    1,675 

 

  b. The Company’s contract liabilities were as follows:

     

  

Nine months

ended

September 30,
  

Twelve months

ended

December 31,
 
   2022   2021 
   USD in thousands 
Balance at beginning of period   2,420    848 
Deferred revenue relating to new sales   1,616    1,641 
Revenue recognized during the period – development services   (211)   - 
Recognition during the period - other   (72)   (69)
Balance at end of period   3,753    2,420 

 

Remaining Performance Obligations

 

Remaining Performance Obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be recognized as revenue in future periods. As of September 30, 2022, the total RPO amounted to $3,753 thousand, which the Company expects to recognize over the expected manufacturing term of the product under development.

 

- 18 -
 

 

NOTE 6 – SCOUTCAM INC.

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 6 - INVENTORY:

 

Composed as follows:

 

   September 30,   December 31, 
   2022   2021 
   USD in thousands 
Raw materials and supplies   544    99 
Work in progress   65    2 
Finished goods   43    66 
Inventory Net   652    167 

 

During the period ended September 30, 2022, no impairment occurred.

 

NOTE 7 – LOSS PER SHARE

 

Basic loss per share is computed by dividing net loss attributable to ordinary shareholders of the Company, by the weighted average number of ordinary shares as described below.

 

In computing the Company’s diluted loss per share, the numerator used in the basic loss per share computation is adjusted for the dilutive effect, if any, of the Company’s potential shares of common stock. The denominator for diluted loss per share is a computation of the weighted-average number of ordinary shares and the potential dilutive ordinary shares outstanding during the period.

 

NOTE 8 – RELATED PARTIES

 

a.    Balances with related parties:

SCHEDULE OF BALANCES WITH RELATED PARTIES 

   September 30, 2022   December 31, 2021 
   USD in thousands 
         
Directors(*)   67    - 
Medigus   -    39 

 

(*) represents directors’ compensation

 

  b. During nine months ended September 30, 2022 the Company received development services from Smartec R&D Ltd., a company owned by the Company’s CTO.
     
    Total compensation during the nine months ended September 30, 2022 and September 30, 2021 was approximately $87 thousand and $52 thousand, respectively.
     
  c. On July 12, 2022, the Company and Yovav Sameah, the Chief Executive Officer of the Company, mutually agreed that the Yovav’s employment with the Company would terminate on October 18, 2022.

 

NOTE 9 – SUBSEQUENT EVENTS

 

  On July 13, 2022, the Board resolved to appoint Mr. Yehu Ofer to serve as Chief Executive Officer of the Company, which appointment shall enter into effect on October 18, 2022.

 

- 19 -
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements”. You should review the “Risk Factors” section of our Annual Report for the fiscal year ended December 31, 2021 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

Overview

 

The Company’s primary business activity during last few months was enlarging its focus on R&D activities in the domain of I4.0 (including Predictive Maintenance, PdM, and Condition Based Monitoring, CBM, in sectors such as the aviation, energy and automotive). The main effect of this activity was an increase in the number of employees to enable the Company to manage the anticipated increased workload and solution development.

 

In addition, recently the Company completed the verification and validation (V&V) stage of its miniature camera solution with a Fortune 500 company and moved from R&D stage to production stage.

 

Comparison of the nine months ended September 30, 2022 and 2021

 

The following table summarizes our results of operations for the nine months period ended September 30, 2022 and 2021, together with the changes in those items in dollars and as a percentage:

 

   Nine months ended September 30,     
   2022   2021   % Change 
Revenues   506,000    321,000    58%
Cost of Revenues   1,279,000    821,000    56%
Gross Loss   (773,000)   (500,000)   55%
Research and development expenses   3,023,000    1,193,000    153%
Sales and marketing expense   617,000    629,000    (2)%
General and administrative expenses   3,262,000    3,931,000    (17)%
Operating Loss   (7,675,000)   (6,253,000)   23%

 

Revenues

 

As a result of the nature of our target market and the current stage of our development, a substantial portion of our revenue comes from a limited number of customers.

 

For the nine months ended September 30, 2022, we generated revenues of $506,000, an increase of $185,000, or 58% from the nine months ended September 30, 2021.

 

The increase in revenues was primarily due to the increase in revenue from our miniature camera solution with the Fortune 500 company due to completion R&D stage and moving to production stage. Total revenues recorded from our miniature camera solution with the Fortune 500 company during the nine months ended September 30, 2022, amounted to approximately $433,000. We did not record any revenue from our miniature camera solution with the Fortune 500 company during the nine months ended September 30, 2021.

 

This increase in revenues was partly offset by the following:

 

  - Total revenues recorded from A.M. Surgical during the nine months ended September 30, 2021, amounted to approximately $200,000. We did not record any revenue from A.M. Surgical during the nine months ended September 30, 2022.
     
  - the decrease of $49,000 due to an overall decrease in the sales of the Company’s component products to occasional customers.

 

Cost of Revenues

 

Cost of revenue is primarily comprised of cost of personnel including warehouse personnel costs, inventory write-downs, certain allocated facilities and expenses associated with logistics and quality control.

 

Cost of revenues for the nine months ended September 30, 2022 was $1,279,000, an increase of $458,000, or 56%, compared to cost of revenues of $821,000 for the nine months ended September 30, 2021. The increase was primarily due to an increase in materials as a result of an increase in revenues, an increase in payroll expenses due to stock-based compensation and due to the transition from the R&D stage to the production stage as described on “Overview” and increase in facility costs due to a lease for additional office space.

 

In the second quarter of 2022 the Company completed the development service stage of its miniature camera solution relating to these advanced payments and moved to production. As a result, the Company recognized expenses of $120 thousands during the nine-month period, based on the expected manufacturing term of the product.

 

- 20 -
 

 

Gross Loss

 

Gross loss for the nine months ended September 30, 2022 was $773,000, an increase of $273,000, or 55%, compared to gross loss of $500,000 for the nine months ended September 30, 2021.

 

The increase was primarily due to increase in cost of revenues partially offset by an increase in revenue as described above.

 

Research and Development Expenses

 

Research and development efforts are focused on new product development and on developing additional functionality for our new and existing products. These expenses primarily consist of employee-related expenses, including salaries, benefits, and stock-based compensation expense for personnel engaged in research and development functions, consulting and professional fees related to research and development activities, prototype materials, facility costs and other allocated expenses, which include expenses for rent and maintenance of our facility, utilities, depreciation and other supplies. We expense research and development costs as incurred.

 

Research and development expenses for the nine months ended September 30, 2022 were $3,023,000, an increase of $1,830,000, or 153%, compared to $1,193,000 for the nine months ended September 30, 2021.

 

The increase was primarily due to an increase in payroll expenses (including stock-based compensation), materials and subcontractors, and because we have recently begun examining additional applications for our micro ScoutCam™ portfolio outside of the medical, defense and aerospace fields, including in sectors such as automotive, industrial non-destructing-testing industries, automotive and energy and increase in facility costs due to a lease for additional office space.

 

In addition, there was an increase in R&D payroll expenses in first nine months of 2022 due to the fact that during the corresponding period last year a part of our payroll expenses was capitalized to contract fulfillment asset and was not recognized as expenses in profit and loss.

 

We expect that our research and development expenses will increase as we continue to develop our products and service and recruit additional research and development employees to the I4.0 domain.

 

Sales and Marketing Expenses

 

Sales and marketing expenses primarily consist of personnel costs, consulting services, promotional materials, demonstration equipment and certain allocated facility infrastructure costs.

 

Sales and marketing expenses for the nine months ended September 30, 2022 were $617,000, a decrease of $12,000, or 2%, compared to $629,000 for the nine months ended September 30, 2021.

 

We expect that our selling and marketing expenses will increase as we continue to increase our selling and marketing efforts.

 

General and Administrative Expenses

 

General and administrative expenses primarily consist of salaries and other related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs, as well as professional fees for legal, patent, consulting, investor, and public relations, accounting, auditing, tax services and insurance costs.

 

General and Administrative expenses for the nine months ended September 30, 2022 were $3,262,000, a decrease of $669,000, or 17%, compared to $3,931,000 for the nine months ended September 30, 2021.

 

The decrease was primarily due to:

 

  - decrease in IP expenses and
  -

cancellation of a provision of $129,000 related to additional taxes due, following the entering into an agreement with the Israeli Tax Authority. On September 30, 2021, the Company accrued an amount of approximately NIS 740,000 ($229,000) for additional taxes due following a VAT audit by the Israeli Tax Authority for the years 2019-2021. In July 2022, the Company reached an agreement with the Israeli Tax Authority, according to which the amount due in additional taxes was reduced to approximately NIS 341,000 ($100,000).

 

- 21 -
 

 

Operating loss

 

We incurred an operating loss of $7,675,000 for the nine months ended September 30, 2022, an increase of $1,422,000, or 23%, compared to operating loss of $6,253,000 for the nine months ended September 30, 2021.

 

The increase in operating loss was primarily due to increases in gross loss and expenses related to research and development, partially offset by decrease in sales and marketing expenses and general and administrative expenses, as described above.

 

Cash Flows

 

The following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):

 

   Nine month ended September 30, 
   2022   2021 
Cash used in Operating Activity   (4,107,000)   (4,704,000)
Cash used in Investing Activity   (1,587,000)   (483,000)
Cash provided by Financing Activity   -    21,527,000 

 

Operating Activities

 

Our primary uses of cash from operating activities have been for headcount-related expenditures, research and development costs, manufacturing costs, marketing and promotional expenses, professional services cost and costs related to our facilities. Our cash flows from operating activities will continue to be affected due to the expected increase of spending on our business and our working capital requirements.

 

During the nine months ended September 30, 2022, cash used in operating activities was $4.1 million, consisting of net loss of $7.8 million, partially offset by a non-cash benefit of $1.9 million, a favorable net change in operating assets and liabilities of $1.4 million and loss from exchange differences on cash and cash equivalents of $0.3 million. Our non-cash benefit consisted primarily of non-cash charges of $1.4 million for stock-based compensation. The net change in our operating assets and liabilities primarily reflects cash inflows from changes in contract liability of $1.3 million.

 

During the nine months ended September 30, 2021, cash used in operating activities was $4.7 million, consisting of net loss of $6.3 million partially offset by a non-cash benefit of $1.3 million and a favorable net change in operating assets and liabilities of $0.2 million. Our non-cash benefit consisted primarily of non-cash charges of $1.3 million for stock-based compensation.

 

- 22 -
 

 

Investing Activities

 

For the nine months ended September 30, 2022, net cash flows used in investing activities was $1,587,000, due to change of $1,500,000 in short terms deposits and due to purchase of property and equipment.

 

For the nine months ended September 30, 2021, net cash flows used in investing activities was $483,000, due to the purchase of property and equipment.

 

Financing Activities

 

For the nine months ended September 30, 2021, net cash flows provided by financing activities was $21.5 million, due to proceeds from the issuance of shares and warrants equivalent to approximately $19.1 million and proceeds from exercise from warrants of approximately $2.5 million.

 

Comparison of the three months ended September 30, 2022 and 2021

 

The following table summarizes our results of operations for the three months period ended September 30, 2022, and 2021, together with the changes in those items in dollars and as a percentage:

 

   Three months ended September 30,     
   2022   2021   % Change 
Revenues   134,000    23,000    483%
Cost of Revenues   430,000    211,000    104%
Gross Loss   (296,000)   (188,000)   57%
Research and development expenses   1,048,000    550,000    91%
Sales and marketing expense   171,000    225,000    (24)%
General and administrative expenses   810,000    1,603,000    (49)%
Operating Loss   (2,325,000)   (2,566,000)   (9)%

 

Revenues

 

For the three months ended September 30, 2022, we generated revenues of $134,000, an increase of $111,000, or 483%, from the three months ended September 30, 2021.

 

The increase in revenues was primarily due to the increase in revenue from our miniature camera solution with the Fortune 500 company due to completion R&D stage and moving to production stage. Total revenues recorded from our miniature camera solution with the Fortune 500 company during the three months ended September 30, 2022, amounted to approximately $106,000. We did not record any revenue from our miniature camera solution with the Fortune 500 company during the three months ended September 30, 2021.

 

Cost of Revenues

 

Cost of revenue is primarily comprised of cost of personnel including warehouse personnel costs, inventory write-downs, certain allocated facilities and expenses associated with logistics and quality control.

 

Cost of revenues for the three months ended September 30, 2022 was $430,000, an increase of $219,000, or 104%, compared to cost of revenues of $211,000 for the three months ended September 30, 2021.

 

- 23 -
 

 

The increase was primarily due to an increase in materials as a result of an increase in revenues, an increase in payroll expenses due to stock-based compensation and due to the transition from the R&D stage to the production stage as described on “Overview” and increase in facility costs due to a lease for additional office space.

 

In the second quarter of 2022 the Company completed the development service stage of its miniature camera solution relating to these advanced payments and moved to production. As a result, the Company recognized expenses of $60 thousands during the nine-month period, based on the expected manufacturing term of the product.

 

Gross Loss

 

Gross loss for the three months ended September 30, 2022 was $296,000, an increase of $108,000, or 57%, compared to gross loss of $188,000 for the three months ended September 30, 2021.

 

The increase was primarily due to increase in cost of revenues partially offset by an increase in revenue as described above.

 

Research and Development Expenses

 

Research and development efforts are focused on new product development and on developing additional functionality for our new and existing products. These expenses primarily consist of employee-related expenses, including salaries, benefits, and stock-based compensation expense for personnel engaged in research and development functions, consulting and professional fees related to research and development activities, prototype materials, facility costs and other allocated expenses, which include expenses for rent and maintenance of our facility, utilities, depreciation and other supplies. We expense research and development costs as incurred.

 

Research and development expenses for the three months ended September 30, 2022 were $1,048,000, an increase of $498,000, or 91%, compared to $550,000 for the three months ended September 30, 2021.

 

The increase was primarily due to an increase in payroll expenses (including stock-based compensation), materials and subcontractors, and because we have recently begun examining additional applications for our micro ScoutCam™ portfolio outside of the medical, defense and aerospace fields, including in sectors such as automotive, industrial non-destructing-testing industries, automotive and energy and increase in facility costs due to a lease for additional office space.

 

We expect that our research and development expenses will increase as we continue to develop our products and service and recruit additional research and development employees to the I4.0 domain.

 

Sales and Marketing Expenses

 

Sales and marketing expenses primarily consist of personnel costs, consulting services, promotional materials, demonstration equipment and certain allocated facility infrastructure costs.

 

Sales and marketing expenses for the three months ended September 30, 2022 were $171,000, a decrease of $54,000, or 24%, compared to $225,000 for the three months ended September 30, 2021.

 

The decrease was primarily due to a decrease in marketing activity, the retirement of a director of business development in the US and a decrease in expenditures on a multi-platform digital marketing campaign.

 

We expect that our selling and marketing expenses will increase as we continue to increase our selling and marketing efforts.

 

General and Administrative Expenses

 

General and administrative expenses primarily consist of salaries and other related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs, as well as professional fees for legal, patent, consulting, investor, and public relations, accounting, auditing, tax services and insurance costs.

 

General and Administrative expenses for the three months ended September 30, 2022 were $810,000, a decrease of $793,000, or 49%, compared to $1,603,000 for the three months ended September 30, 2021.

 

The decrease was primarily due to:

 

-decrease in IP expenses,
-decrease in share-based compensation expenses and
 -

cancellation of a provision of $129,000 related to additional taxes due, following the entering into an agreement with the Israeli Tax Authority. On September 30, 2021, the Company accrued an amount of approximately NIS 740,000 ($229,000) for additional taxes due following a VAT audit by the Israeli Tax Authority for the years 2019-2021. In July 2022, the Company reached an agreement with the Israeli Tax Authority, according to which the amount due in additional taxes was reduced to approximately NIS 341,000 ($100,000).

 

Operating loss

 

We incurred an operating loss of $2,325,000 for the three months ended September 30, 2022, a decrease of $241,000, or 9%, compared to operating loss of $2,566,000 for the three months ended September 30, 2021.

 

The decrease in operating loss was primarily due to decrease in general and administrative and sales and marketing expenses partially offset by increase in gross loss and in expenses related to research and development, as described above.

 

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Cash Flows

 

The following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):

 

   Three month ended September 30, 
   2022   2021 
Cash used in Operating Activity   (1,709,000)   (1,650,000)
Cash used in Investing Activity   (3,045,000)   (313,000)
Cash used in Financing Activity   -    (95)

 

Operating Activities

 

Our primary use of cash from operating activities have been for headcount-related expenditures, research and development costs, manufacturing costs, marketing and promotional expenses, professional services cost and costs related to our facilities. Our cash flows from operating activities will continue to be affected due to the expected increase of spending on our business and our working capital requirements.

 

During the three months ended September 30, 2022, cash used in operating activities was $1.7 million, consisting of net loss of $2.2 million partially offset by a non-cash benefit of $0.5 million. Our non-cash benefit consisted primarily of non-cash charges of $0.5 million for stock-based compensation.

 

During the three months ended September 30, 2021, cash used in operating activities was $1.7 million, consisting of net loss of $2.6 million partially offset by a non-cash benefit of $0.7 million. Our non-cash benefit consisted primarily of non-cash charges of $0.7 million for stock-based compensation.

 

Investing Activities

 

For the three months ended September 30, 2022, net cash flows used in investing activities was $3,045,000, primarily due to change of $3,000,000 in short terms deposits.

 

For the three months ended September 30, 2021, net cash flows used in investing activities was $313,000, due to the purchase of property and equipment.

 

Additional Cash Requirements

 

We plan to continue to invest for long-term growth, and therefore we expect that our expenses will increase. We currently believe that our existing cash and cash equivalents and short-term deposits will be sufficient to meet our anticipated cash needs for at least the next 12 months. We expect our expenses will increase in connection with our ongoing activities, particularly as we continue the research and development and the scale up process of our I4.0 solutions. We expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. We may raise these funds through equity financing, debt financing or other sources, which may result in further dilution in the equity ownership of our common stock. There is no assurance that we will be able to maintain operations at a level sufficient for investors to obtain a return on their investment in our common stock, or that we will be able to raise sufficient capital required to implement our business plan on acceptable terms, if at all. Even if we are successful in raising sufficient capital to implement our business plan, we will, most likely, continue to be unprofitable for the foreseeable future. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

 

Liquidity and Capital Resources

 

As of September 30, 2022, we had cash and cash equivalents of $2.6 million and $12.6 million of short-term deposits compared to cash and cash equivalents $8.6 million and $11 million of short-term deposits as of December 31, 2021. In addition, as of September 30, 2022 we incurred an accumulated deficit of approximately $23.1 million, compared to $15.3 million as of December 31, 2021.

 

Our primary sources of liquidity to date have been from fund raising and warrant exercises.

 

- 25 -
 

 

Off-Balance Sheet Arrangements

 

None.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a smaller reporting company, we are not required to provide the information requested by this Item.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

 

No change in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(e), occurred during the fiscal quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II- OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.

 

ITEM 1A. RISK FACTORS.

 

There have been no material changes from the information set forth in “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31,2021 as filed with the SEC on March 30, 2022.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

 

There have been no unregistered sales of equity securities in addition to the sales provided under Form 8-K as filed with the SEC during the recent fiscal quarter ended September 30, 2022.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS.

 

(a) The following documents are filed as exhibits to this Quarterly Report or incorporated by reference herein.

 

Exhibit

Number

  Description
3.1.1   Amended and Restarted Articles of Incorporation, effective as of August 9, 2021 (incorporated by reference to Exhibit 3.1.4 to our Quarterly Report on Form 10-Q filed with the SEC on August 12,2021)
     
3.2.1   Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2.2 to our Quarterly Report on Form 10-Q filed with the SEC on August 12, 2021).
     
31.1*   Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
     
31.2*   Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
     
32.1**   Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2**   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   Inline XBRL Instance Document
     
101.INS   Inline XBRL Taxonomy Extension Schema Document
     
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
     
104   Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
     
*   Filed herewith.
     
**   Furnished herewith.

 

- 27 -
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 14, 2022 SCOUTCAM INC.
     
  By: /s/ Yehu Ofer
  Name: Yehu Ofer
  Title: Chief Executive Officer
    ScoutCam Inc.
     
  By: /s/ Tanya Yosef
  Name: Tanya Yosef
  Title: Chief Financial Officer
    ScoutCam Inc.

 

- 28 -

 

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