Bulletin
Investor Alert

June 22, 2020, 2:04 p.m. EDT

10-Q: SCOUTCAM INC.

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

(EDGAR Online via COMTEX) -- 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, 2019. 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, 2019 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

ScoutCam Ltd. was formed in Israel on January 3, 2019, as a wholly owned subsidiary of Medigus Ltd., an Israeli company ("Medigus"), and commenced operations on March 1, 2019. ScoutCam was incorporated as part of the reorganization of Medigus, which was designed to distinguish ScoutCam's miniaturized imaging business, or the micro ScoutCam(TM) portfolio, from Medigus's other operations and to enable Medigus to form a separate business unit with dedicated resources focused on the promotion of such technology (the "Reorganization"). In December 2019, Medigus and ScoutCam consummated that Amended and Restated Asset Transfer Agreement, which transferred and assigned certain assets and intellectual property rights related to its miniaturized imaging business.

On March 1, 2019, 12 employees moved from Medigus to ScoutCam.

- 21 -

The following table summarizes our results of operations for the three month ended March 31, 2020 and 2019, together with the changes in those items in dollars and as a percentage:







                                                  2020            2019        % Change
        Revenues                                    40,000         24,000            67 %
        Cost of Revenues                           130,000        109,000            19 %
        Gross Loss                                 (90,000 )      (85,000 )           6 %
        Research and development expenses          255,000         87,000           193 %
        Sales and marketing expense                 52,000         41,000            27 %
        General and administrative expenses      1,112,000        116,000           859 %
        Operating Loss                          (1,509,000 )     (329,000 )         359 %
        


Revenues

For the three months ended March 31, 2020, ScoutCam generated revenues of $40,000, an increase of $16,000 from the three months ended March 31, 2019 revenues.

The increase in revenues was primarily due to an overall increase in the sales of the Company's component products to occasional customers.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2020 were $130,000, an increase of $21,000 compared to cost of revenues of $109,000 for the three months ended March 31, 2019. The increase was primarily due to an increase in payroll expenses, as result of hiring additional employees and losses in severance pay assets.

Gross Loss

Gross loss for the three months ended March 31, 2020 was $90,000, an increase of $5,000 compared to gross loss of $85,000 for the three months ended March 31, 2019.

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2020, were $255,000, an increase of $168,000, or 193%, compared to $87,000 for the three months ended March 31, 2019. The increase was primarily due to an increase in payroll expenses, as result of an increase in share - based compensation expenses (see note 4 to our interim condensed consolidated financial statements as of March 31, 2020), hiring additional employees and losses in severance pay assets.

Sales and Marketing Expenses

Sales and marketing expenses for the three months ended March 31, 2020, were $52,000, an increase of $11,000, or 27%, compared to $41,000 for the three months ended March 31, 2019. The increase was primarily due to an increase in payroll expenses, as result of hiring additional employees.

General and Administrative Expenses

General and Administrative expenses for the three months ended March 31, 2020, were $1,112,000, an increase of $996,000, or 859%, compared to $116,000 for the three months ended March 31, 2019. The increase was primarily due to an increase in payroll expenses, as result an increase in share - based compensation expenses (see note 4 to our interim condensed consolidated financial statements as of March 31, 2020) and hiring additional employees and an increase in professional services. The increase in professional services resulted from the incorporation of ScoutCam Ltd. as an independent company and in connection with the execution of that certain securities exchange agreement involving ScoutCam Ltd.

- 22 -

Operating loss

We incurred an operating loss of $1,509,000 for the three months ended March 31, 2020, an increase of $1,180,000, or 359%, compared to operating loss of $329,000 for the three months ended March 31, 2019. The increase in operating loss was due to $5,000 increase in gross loss, $168,000 increase in research and development expenses, $11,000 increase in sales and marketing expenses and $996,000 increase in administrative and general expenses.

Liquidity and Capital Resources

Sources of Liquidity

The Company has financed its operations primarily through Medigus, private placement transactions for the issuance of common stock and warrants, and sales to customers.







        Cash Flows
        The following table sets forth the significant sources and uses of cash for the
        periods set forth below (in dollars):
                                                                   2020            2019
        Cash used in Operating Activity                          (1,137,000 )     (514,000 )
        Cash used in Investing Activity                            (185,000 )            -
        Cash provided by Financing Activity                         828,000        604,000
        Profit from exchange differences on cash equivalents         96,000              -
        


Operating Activities

For the three months ended March 31, 2020, net cash flows used in operating activities was $1,137,000, compared to net cash flows used in operating activities of $514,000 for the three months ended March 31, 2019, an increase of $623,000. The change was mainly due to an increase in net loss, an increase in inventory and other accrued expenses, which was partially offset by an increase in stock-based compensation.

Investing Activities

For the three months ended March 31, 2020, net cash flows used in investing activities was $185,000 as compared to $0 for the same period of 2019. The change was due to the purchase of property and equipment during the three months ended March 31, 2020.

Financing Activities

For the three months ended March 31, 2020, net cash flows provided by financing activities was $828,000, compared to net cash flows provided by financing activities of $604,000 for three months ended March 31, 2019.

Net cash provided by financing activities in the three months ended March 31, 2020 consisted of $909,000 in proceeds from the issuance of shares and warrants, and $81,0000 in loan repayments from Medigus. Net cash provided by financing activities in the three months ended March 31, 2019 was generated from the transfer of funds from Medigus.

Profit from exchange differences on cash equivalents

During the three months ended March 31, 2020, ScoutCam Ltd. generated profit from exchange differences on cash equivalents of $96,000. This profit represents a change in the Company's cash and cash equivalents as a result of the change in the dollar exchange rate against the NIS during the three months ended March 31, 2020.

Future Funding Requirements

The Company believes that it will require additional financing in order to provide the capital it needs to achieve its growth targets.

Off-Balance Sheet Arrangements

ScoutCam Ltd. leases its headquarters in Omer, Israel, with a total of approximately 807 gross square meters. In January 2020, ScoutCam extended the agreement through the end of 2020. The rental payments are linked to the Israeli CPI.

- 23 -

Jun 22, 2020

COMTEX_367228864/2041/2020-06-22T14:03:37

Is there a problem with this press release? Contact the source provider Comtex at editorial@comtex.com. You can also contact MarketWatch Customer Service via our Customer Center.

(c) 1995-2020 Cybernet Data Systems, Inc. All Rights Reserved

This Story has 0 Comments
Be the first to comment

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.