As filed with the Securities and Exchange Commission
on June 28, 2021
Registration
No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
ScoutCam
Inc.
(Exact
Name of Registrant as Specified in its Charter)
Nevada
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7370
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47-4257143
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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(Primary
Standard Industrial
Classification
Code Number)
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|
(I.R.S.
Employer
Identification
No.)
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Suite
7A, Industrial Park, P.O. Box 3030
Omer,
Israel 8496500
Tel:
+972 73 370-4691
(Address,
including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
State
Agent and Transfer Syndicate, Inc.
112
North Curry St.
Carson
City, Nevada 89703
Tel:
(775) 882-1013
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
Shachar
Hadar, Adv.
Meitar
| Law Offices
16
Abba Hillel Silver Rd.
Ramat
Gan 5250608, Israel
Tel:
+972-3-610-3100
Fax:
+972-3-610-3111
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|
Steven
J. Glusband, Esq.
Guy
Ben-Ami, Esq.
Carter
Ledyard & Milburn LLP
2
Wall Street
New
York, NY 10005
Tel:
212-238-8605
Fax:
212-732-3232
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|
Gregory
Sichenzia, Esq.
Darrin
M. Ocasio, Esq.
Sichenzia
Ross Ference LLP
1185
Avenue of the Americas
31st
Floor
New
York, NY 10036
Tel:
212-930- 9700
Fax:
212 930 9725
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Approximate
date of commencement of proposed sale to public: From time to time after the effectiveness of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
[ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
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.
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Large
accelerated filer
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[ ]
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Accelerated
filer
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[ ]
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Non-accelerated
filer
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[X]
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Smaller
reporting company
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[X]
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Emerging
growth company
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[ ]
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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 7(a)(2)(B) of the Securities Act. [ ]
CALCULATION
OF REGISTRATION FEE
Title of each Class of Securities to be Registered
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Proposed Maximum Aggregate Offering Price(1)
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Amount of Registration Fee(2)
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Common Stock, par value $0.001 per share
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$
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11,500,000
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$
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1,255
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Total
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$
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11,500,000
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$
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1,255
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(1)
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Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended,
or the Securities Act, which includes such number of shares of Common Stock that may be sold upon exercise of the underwriters’
option to purchase additional Common Stock. See “Underwriting.”
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(2)
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Calculated
pursuant to Rule 457(o) under the Securities Act based on an estimate of the proposed maximum aggregate offering price.
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The
Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date
as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities
and we are not soliciting offers to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION
DATED
JUNE 28, 2021
PRELIMINARY
PROSPECTUS
Shares
of Common Stock
We
are offering shares of common stock, par value $0.001 per share, or
Common Stock. We refer to the shares of Common Stock being offered hereby as the Shares. See “Description of the Offered Shares”
for more information.
Our
Common Stock is quoted on the OTCQB Market, or the OTCQB, under the symbol “SCTC”. On June 25, 2021, the last reported sale
price of our Common Stock on the OTCQB was $1.10 per share. The actual offering price per share of Common Stock in this offering
will be determined between the underwriters and us at the time of pricing, and may be at a discount to the current market price for our
Common Stock. We are offering all of the Common Stock offered by this prospectus.
We
have applied to list our Common Stock on the Nasdaq Capital Market under the same symbol (“SCTC”). While we believe that,
upon the completion of the offering contemplated by this prospectus, we will meet the standards for listing on the Nasdaq Capital Market.
This offering will occur only if Nasdaq approves the listing of our Common Stock. No assurance can be given that our application will
be approved or that a trading market will develop.
Investing
in our Shares involves a high degree of risk. See “Risk Factors” beginning on page 4 of this prospectus for a discussion
of information that should be considered in connection with an investment in our Shares.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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Per
Share
of
Common
Stock
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Total
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Public offering price
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$
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$
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Underwriting discounts and
commissions (1)
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$
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$
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Proceeds to us (before expenses)
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$
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$
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(1)
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For
a description of the additional compensation to be received by the underwriters, see “Underwriting” beginning on page
36 for additional information regarding the underwriters’ compensation
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The
offering is being underwritten on a firm commitment basis. The underwriters have an option exercisable within 45 days from the date of
this prospectus to purchase up to additional shares of Common Stock from
us at the public offering price, less the underwriting discounts and commissions. If the underwriters exercise this option in full, the
total underwriting discounts and commissions payable by us will be $ ,
and the total proceeds to us, before expenses, will be $ .
Delivery
of the Shares offered hereby is expected to be made on or about ,
2021.
The
date of this prospectus is , 2021
Aegis
Capital Corp.
TABLE
OF CONTENTS
Neither
we nor the underwriters have authorized anyone to provide information different from that contained in this prospectus, any amendment
or supplement to this prospectus or in any free writing prospectus, if any, prepared by us or on our behalf. When you make a decision
about whether to invest in our Shares, you should not rely upon any information other than the information in this prospectus and any
free writing prospectus, if any, prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of our Common
Stock means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer
to sell or solicitation of an offer to buy these shares of Common Stock in any circumstances under which the offer or solicitation is
unlawful.
Market
data and certain industry data and forecasts used throughout this prospectus were obtained from sources we believe to be reliable, including
market research databases, publicly available information, reports of governmental agencies, and industry publications and surveys. We
have relied on certain data from third-party sources, including internal surveys, industry forecasts, and market research, which we believe
to be reliable based on our management’s knowledge of the industry. While we are not aware of any misstatements regarding the industry
data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors,
including those discussed under the heading “Risk Factors” and elsewhere in this prospectus.
For
investors outside of the United States: Neither we nor the underwriters have done anything that would permit this offering or possession
or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You
are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
Solely
for convenience, some of the trademarks, service marks, and trade names referred to in this prospectus are without the ® and ™
symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable
law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This prospectus contains
additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service
marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our
use or display of other companies’ trademarks, service marks or trade names to imply a relationship with, or endorsement or sponsorship
of us by, any other companies.
Throughout
this prospectus, unless otherwise designated, the terms “we,” “us,” “our,” “ScoutCam,”
“the Company,” and “our Company” refer to ScoutCam Inc. and our consolidated subsidiary, ScoutCam Ltd., a private
company organized under the laws of the State of Israel. The term “Common Stock” refers to shares of our common stock, par
value $0.001 per share. The terms “dollar,” “US$,” or “$” refer to US dollars, the lawful currency
of the United States.
PROSPECTUS
SUMMARY
This
summary below highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you
should consider before investing in our Shares. Before you decide to invest in our Shares, you should read this summary together with
the more detailed information appearing in this prospectus, including “Risk Factors,” “Selected Historical Financial
Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business”
and our consolidated financial statements and the related notes included at the end of this prospectus herein, before making an investment
in our Common Stock.
Overview
We
are engaged in the development, production and marketing of innovative miniaturized imaging equipment known as our micro ScoutCam™
portfolio for use in medical procedures as well as various industrial applications. As of the date of this prospectus, we derive a substantial
portion of our revenue from applications of our micro ScoutCam™ portfolio within the medical, defense and aerospace fields. We
have recently begun examining additional applications for our micro ScoutCam™ portfolio outside of the foregoing industries, including
in, among others, the automotive, and industrial non-destructive-testing industries. We plan to further expand our activity in these
non-medical spaces.
Our
Corporate History and Background
We
were incorporated under the laws of the State of Nevada on March 22, 2013 under the name Intellisense Solutions Inc., or Intellisense.
We were initially engaged in the business of developing web portals to allow companies and individuals to engage in the purchase and
sale of vegetarian food products over the Internet. However, we were unable to execute our original business plan, develop significant
operations or achieve commercial sales.
On
December 30, 2019, we acquired all of the issued and outstanding share capital of ScoutCam Ltd. Following this transaction, we integrated
and fully adopted ScoutCam Ltd.’s business into our Company as our primary business activity. On December 31, 2019, we changed
our name to ScoutCam Inc.
ScoutCam
Ltd. was formed in the State of Israel on January 3, 2019 as a wholly-owned subsidiary of Medigus Ltd., or Medigus, an Israeli company
traded on the Nasdaq Capital Market, and commenced operations on March 1, 2019. ScoutCam Ltd. was incorporated as part of a reorganization
of Medigus, which was designed to distinguish ScoutCam Ltd.’s miniaturized imaging business, or the micro ScoutCam™ 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. In December 2019, Medigus and ScoutCam Ltd. consummated a certain Amended and Restated Asset Transfer Agreement,
which transferred and assigned certain assets and intellectual property rights related to its miniaturized imaging business.
Risks
Related to Our Business, Operations and Financial Condition
Our
business is subject to a number of risks as discussed more fully in “Risk Factors” beginning on page 4 of this prospectus.
These risks include, but are not limited to, the following:
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our
reliance on third-party suppliers for most of the components of our products could harm our ability to meet demand for our products
in a timely and cost-effective manner;
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because
of our limited operating history, we may not be able to successfully operate our business or execute our business plan;
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our
commercial success depends upon the degree of market acceptance by the medical community as well as by other prospect markets and
industries;
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we
expect to face significant competition, and if we cannot successfully compete with new or existing technologies or future developed
products, our marketing and sales will suffer and we may never be profitable; and
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if
we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets
and third parties to perform these services, we may not be successful in commercializing our products and technology.
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Our
Corporate Information
We
were incorporated under the laws of the State of Nevada on March 22, 2013 under the name Intellisense. We changed our name to ScoutCam
Inc. on December 31, 2019. We have one wholly-owned subsidiary, ScoutCam Ltd., a private company organized under the laws of the State
of Israel, which we acquired on December 30, 2019.
Our
principal executive offices are located at Suite 7A, Industrial Park, P.O. Box 3030, Omer, Israel 8496500. Our telephone number is +972
73 370-4691. Our website address is https://www.scoutcam.com. This website address is included in this prospectus as an inactive
textual reference only. The information and other content appearing on our website are not part of this prospectus.
THE
OFFERING
Common
Stock offered by us in the offering
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shares
of Common Stock.
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Option
to purchase additional shares
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We
have granted the underwriters an option for a period of 45 days to purchase up to an additional shares
of our common stock at the public offering price, less underwriting discounts and commissions.
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Total
number of shares of Common Stock outstanding immediately before this offering
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61,342,216
shares of Common Stock (as of June 23, 2021)
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Total
number of shares of Common Stock outstanding immediately after this offering
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shares
of Common Stock (or shares if the underwriters exercise
their over-allotment option in full)
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Offering
Price
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The
assumed offering price is $ per share of Common Stock, the last reported sale
price of our Common Stock on the OTCQB on , 2021. The actual offering
price per share of Common Stock in this offering will be determined between us and the underwriters at the time of pricing, and may
be at a discount to the current market price for our Common Stock.
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Use
of proceeds
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We
expect to receive approximately $ million
in net proceeds from the sale of Common Stock offered by us in this offering (approximately
$ million if the underwriters
exercise their over-allotment option in full), based upon an assumed public offering price
of $ per share of Common
Stock.
We
will use the net proceeds that we receive from the sale of the Shares offered by this prospectus for general corporate purposes and
working capital. See “Use of Proceeds” for additional information.
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Risk
Factors
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Prospective
investors should carefully consider the “Risk Factors” beginning on page 4 of this prospectus for a discussion of certain
factors that should be considered before deciding whether to invest in the shares of Common Stock offered hereby.
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Listing
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Our
Common Stock is quoted on the OTCQB under the symbol “SCTC”. We have applied to list the Common Stock to be issued in
this offering on the Nasdaq Capital Market under the same symbol. If our listing application is approved, we expect to list our Common
Stock on Nasdaq upon consummation of this offering. No assurance can be given that our listing application will be approved. This
offering will occur only if Nasdaq approves the listing of our Common Stock. If Nasdaq does not approve the listing of our common
stock, we will not proceed with this offering.
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The
number of shares of Common Stock to be outstanding immediately after this offering is based on 61,342,216 shares of our common stock
outstanding as of June 23, 2021, and excludes, as of such date:
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10,951,086
shares of Common Stock issuable upon the exercise of outstanding options at a weighted average exercise price of $0.367 per share;
and
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37,004,799
shares of Common Stock issuable upon the exercise of warrants to purchase up to an aggregate of 37,004,799 shares of Common Stock
at a weighted average exercise price of $1.033 per share of Common Stock.
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2,688,492
shares of Common Stock issuable to Medigus if ScoutCam Ltd. achieves an aggregate amount of $33 million in sales within the first
three years immediately after the Exchange Agreement (as defined herein), which represents 10% of the Company’s issued and
outstanding share capital as of the closing of the Exchange Agreement.
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Unless
otherwise indicated, all information in this prospectus assumes no exercise of the outstanding options or warrants described above.
RISK
FACTORS
You
should carefully consider the risks described below, as well as the financial or other information in this prospectus, including our
consolidated financial statements and the related notes, before deciding whether to invest in our Shares. The risks and uncertainties
described below are not the only risks we face. We may face additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial. Any of the risks described below, and any such additional risks, could materially adversely affect our business,
financial condition or results of operations. In such case, you may lose all or part of your original investment.
Risks
Related to Our Business, Operations and Financial Condition
Because
of ScoutCam’s limited operating history, we may not be able to successfully operate our business or execute our business plan.
Given
the limited operating history of ScoutCam, it is hard to evaluate our proposed business and prospects. Our proposed business operations
will be subject to numerous risks, uncertainties, expenses and difficulties associated with early-stage enterprises. Such risks include,
but are not limited to, the following:
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the
absence of a lengthy operating history;
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expected
continual losses for the foreseeable future;
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operating
in multiple currencies;
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our
ability to anticipate and adapt to a developing market(s);
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acceptance
of our products by the medical community (and the non-medical community) and consumers;
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limited
marketing experience;
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insufficient
capital to fully realize our operating plan;
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a
competitive environment characterized by well-established and well-capitalized competitors;
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the
ability to identify, attract and retain qualified personnel; and
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operating
in an environment that is highly regulated by a number of agencies.
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Furthermore,
we have a history of losses, and we may not be able to generate sufficient revenues to achieve and sustain profitability, and as a result,
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, we noted that there is substantial doubt about our ability
to continue as a going concern following the fiscal year ended December 31, 2020. While following the completion of the Private Placement
(as defined herein), the Company remediated this foregoing going concern, the Company believes it is possible such a designation may
be made in the future given the Company’s limited operation experience as well as the various risks identified in this risk factor.
Because
we are subject to these risks, evaluating our business may be difficult, our business strategy may be unsuccessful and we may be unable
to address such risks in a cost-effective manner, if at all. If we are unable to successfully address these risks our business could
be harmed.
If
we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets
and third parties to perform these services, we may not be successful in commercializing our products and technology.
Given
that we are currently a business-to-business (B2B) company, our business is reliant on our ability to successfully attract potential
business targets. Furthermore, we have a limited sales and marketing infrastructure and have limited experience in the sale, marketing
or distribution of our technologies beyond the B2B model. To achieve commercial success for our technologies or any future developed
product, we will need to establish a sales and marketing infrastructure or to out-license such future products.
In
the future, we may consider building a focused sales and marketing infrastructure to market any future developed products and potentially
other product in the United States or elsewhere in the world. Similarly, we may consider evolving our business model in the future and
adopting a business-to-consumer approach, or B2C. There are risks involved with establishing our own sales, marketing and distribution
capabilities. For example, recruiting and training a sales force could be expensive and time consuming and could delay any product launch.
This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors
that may inhibit our efforts to commercialize any future products on our own include:
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our
inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
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the
inability of sales personnel to obtain access to potential customers;
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the
lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies
with more extensive product lines; and
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unforeseen
costs and expenses associated with creating an independent sales and marketing organization.
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If
we are unable to establish our own sales, marketing and distribution capabilities or enter into successful arrangements with third parties
to perform these services, our revenues and our profitability may be materially adversely affected.
In
addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our products inside
or outside of the United States or may be unable to do so on terms that are favorable to us. We likely will have little control over
such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively.
If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third
parties, we will not be successful in commercializing our technologies or any future products we may develop.
We
may require substantial additional funding, which may not be available to us on acceptable terms, or at all.
Our
cash balance as of March 31, 2021 was $12.7 million, which amount does not include $10.5 million we raised in a recent financing round.
We may require additional funding to fund and grow our operations and to develop certain products. There can be no assurance that financing
will be available in amounts or on terms acceptable to us, if at all. In the event we required additional capital, the inability to obtain
additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we require
and are unable to obtain additional financing, we will likely be required to curtail our development plans. In that event, current stockholders
would likely experience a loss of most or all of their investment. Additional funding that we do obtain may be dilutive to the interests
of existing stockholders.
Our
failure to effectively manage growth could impair our business.
Our
business strategy contemplates a period of rapid growth which may put a strain on our administrative and operational resources, and our
funding requirements. Our ability to effectively manage growth will require us to successfully expand the capabilities of our operational
and management systems, and to attract, train, manage, and retain qualified personnel. There can be no assurance that we will be able
to do so, particularly if losses continue and we are unable to obtain sufficient financing. If we are unable to appropriately manage
growth, our business, prospects, financial condition, and results of operations could be adversely affected.
Our
commercial success depends upon the degree of market acceptance by the medical community as well as by other prospect markets and industries.
Our
current business model is that of a business-to-business approach, or B2B, in which we seek to identify target businesses interested
in integrating our technology, or commissioning individual projects using our technology. Any product that we commission or that is brought
to the market may or may not gain market acceptance by prospect customers. The commercial success of our technologies, commissioned products
and any future product that we may develop depends in part on the medical community as well as other industries for various use cases,
depending on the acceptance by such industries of our commissioned products as a useful and cost-effective solution compared to current
technologies. To date, we have not yet commenced proactive market penetration in other industries, with the exception of the biomedical
sector. If our technology or any future product that we may develop does not achieve an adequate level of acceptance, or does not garner
significant commercial appeal, we may not generate significant revenue and may not become profitable. The degree of market acceptance
will depend on a number of factors, including:
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the
cost, safety, efficacy/performance, and convenience of our technology and any commissioned product and any future product that we
may develop in relation to alternative products;
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the
ability of third parties to enter into relationships with us without violating their existing agreements;
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the
effectiveness of our sales and marketing efforts;
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the
strength of marketing and distribution support for, and timing of market introduction of, competing technology and products; and
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publicity
concerning our technology or commissioned products or competing technology and products.
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Our
efforts to penetrate industries and educate the marketplace on the benefits of our technology, and reasons to seek the commissioning
of products based on our technology, may require significant resources and may never be successful. Such efforts to educate the marketplace
may require more resources than are required by conventional technologies.
The
COVID-19 pandemic has adversely affected, and will continue to adversely affect, our business, financial condition, liquidity and results
of operations.
The
COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets
worldwide, placed constraints on the operations of businesses, decreased consumer mobility and activity, and caused significant economic
volatility in the United States, Israel and international capital markets. Our business has been affected in various ways, as discussed
below, including in our operations, and we cannot predict the length and severity of the pandemic or its effects on us and our customers.
We have followed guidance by the U.S. and Israeli governments and the other local governments in which we operate to protect our employees
and our operations during the pandemic and have implemented a remote environment for certain of our employees, and, as a result, may
experience inefficiencies in our employees’ ability to collaborate. We have also experienced difficulty in our efforts to recruit
and hire qualified personnel during this time. In addition, the COVID-19 pandemic has caused an economic recession, high unemployment
rates and other disruptions, both in the United States, Israel and the rest of the world. Any of these impacts, including the prolonged
continuation of these impacts, could adversely affect our business.
We
cannot predict the other potential impacts of the COVID-19 pandemic on our business or operations, and there is no guarantee that any
near-term trends in our results of operations will continue, particularly if the COVID-19 pandemic and the adverse consequences thereof
continue for a long period of time. Additional waves of infections, a continuation of the current environment, or any further adverse
impacts caused by the COVID-19 pandemic could further deteriorate employment rates and the economy, detrimentally affecting our consumer
base and divert consumers’ discretionary income to other uses, including for essential items. These events could adversely impact
our cash flows, results of operations and financial conditions and heighten many of the other risks described in these “Risk Factors.”
Risk
Related to Third Parties
Our
reliance on third-party suppliers for most of the components of our products could harm our ability to meet demand for our products in
a timely and cost-effective manner.
Though
we attempt to ensure the availability of more than one supplier for each important component in any product that we commission, the number
of suppliers engaged in the provision of miniature video sensors which are suitable for our Complementary Metal Oxide Semiconductor (“CMOS”)
technology products is very limited, and therefore in some cases we engage with a single supplier, which may result in our dependency
on such supplier. This is the case regarding sensors for the CMOS type technology that is produced by a single supplier in the United
States. As we do not have a contract in place with this supplier, there is no contractual commitment on the part of such supplier for
any set quantity of such sensors. The loss of our sole supplier in providing us with miniature sensors for our CMOS technology products,
and our inability or delay in finding a suitable replacement supplier, could significantly affect our business, financial condition,
results of operations and reputation.
We
may not be able to manage our strategic partners effectively.
Our
growth strategy may include strategic partners. The process to bring on, train and assist strategic partners is time-consuming and costly.
We expect to expend significant resources to undertake business, financial and legal due diligence on both existing and potential partners,
and there is no guarantee that these will be successful in ultimately increasing our business.
Failure
to manage our partners effectively may affect our success in executing our business plan and may adversely affect our business, financial
condition and results of operation. We may not realize the anticipated benefits of any or all partnerships, or may not realize them in
the time frame expected.
We
may not have sufficient manufacturing capabilities to satisfy any growing demand for our commissioned products. We may be unable to control
the availability or cost of producing such products.
Our
current manufacturing capabilities may not reach the required production levels necessary in order to meet growing demands for any products
we may commission or future products we may develop. While one of the options we are currently contemplating is the acquisition of a
manufacturing facility in Israel in the future, such an engagement has not yet materialized and it is not clear at what point the Company
will execute such an acquisition. In the interim, and prior to the purchase of a manufacturing facility by the Company, there can be
no assurance that our commissioned products can be manufactured at our desired commercial quantities, in compliance with our requirements
and at an acceptable cost. Any such failure could delay or prevent us from shipping said products and marketing our technologies in accordance
with our target growth strategies.
Our
suppliers may not be able to always supply components or products to us on a timely basis and on favorable terms, and as a result, our
dependency on third party suppliers can adversely affect our revenue.
We
will rely on our third-party suppliers for components and depend on obtaining adequate supplies of quality components on a timely basis
with favorable terms to manufacture our commissioned products. Some of those components that we sell are provided to us by a limited
number of suppliers. We will be subject to disruptions in our operations if our sole or limited supply contract manufacturers decrease
or stop production of components or do not produce components and products of sufficient quantity. Alternative sources for our components
will not always be available. Many of our components are manufactured overseas, so they have long lead times, and events such as local
disruptions, natural disasters or political conflict may cause unexpected interruptions to the supply of our products or components.
It
is our intention, as mentioned in the use of proceeds, to allocate financial resources to improve our inventory management, including
establishing an inventory buffer of components appropriate to our business. However, we cannot assure that our attempt will be successful
or that product or component shortages will not occur in the future. If we cannot supply commissioned products or future potentially
developed products due to a lack of components, or are unable to utilize other components in a timely manner, our business will be significantly
harmed. If inventory shortages continue, they could be expected to have a material and adverse effect on our future revenues and ability
to effectively project future sales and operating results.
We
may have difficulty in entering into and maintaining strategic alliances with third parties.
We
have entered into, and we may continue to enter into, strategic alliances with third parties to gain access to new and innovative technologies
and markets. These parties are often large, established companies. Negotiating and performing under these arrangements involves significant
time and expense, and we may not have sufficient resources to devote to our strategic alliances, particularly those with companies that
have significantly greater financial and other resources than we do. The anticipated benefits of these arrangements may never materialize,
and performing under these arrangements may adversely affect our results of operations.
Risks
Related to Competition
We
expect to face significant competition. If we cannot successfully compete with new or existing technologies or future developed products,
our marketing and sales will suffer and we may never be profitable.
We
expect to compete against existing technologies and proven products in different industries. In addition, some of these competitors,
either alone or together with their collaborative partners, operate larger research and development programs than we do, and may have
substantially greater financial resources than we do, as well as significantly greater experience in obtaining applicable regulatory
approvals applicable to the commercialization of our technologies and future products.
Our
customers may develop the capabilities to manufacture our component parts in-house, which would significantly reduce the demand for our
products.
One
of our long-term objectives includes the manufacturing and assembly of our component parts in-house, thereby reducing our reliance on
third parties. Our ability to handle these operations in-house stands to increase our likelihood and potential for profitability. Notwithstanding
this, there remains a risk that our customers will develop the capabilities to manufacture solutions in-house that are currently satisfied
by our component parts. In the event our customers, or future customers, develop such capacities, our potential for profitability may
be significantly reduced.
Failure
to comply with anti-bribery, anti-corruption and anti-money laundering laws could subject us to penalties and other adverse consequences.
We
are subject to the FCPA and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which we do business,
both domestic and abroad. These laws generally prohibit us and our employees from improperly influencing government officials or commercial
parties in order to obtain or retain business, direct business to any person or gain any advantage. The FCPA and other applicable anti-bribery
and anti-corruption laws also may hold us liable for acts of corruption and bribery committed by our third-party business partners, representatives
and agents. In addition, we leverage third parties to sell our products and conduct our business abroad. We and our third-party business
partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies or
state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these third-party business
partners and intermediaries, our employees, representatives, contractors, channel partners and agents, even if we do not explicitly authorize
such activities. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures
designed to prevent any such actions. While we have policies and procedures to address compliance with such laws, we cannot assure you
that our employees and agents will not take actions in violation of our policies or applicable law, for which we may be ultimately held
responsible and our exposure for violating these laws increases as our international presence is established and as we increase sales
and operations in foreign jurisdictions. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws and anti-money
laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees,
loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial
diversion of management’s attention, a decline in the market price of our Common Stock or overall adverse consequences to our reputation
and business, all of which may have an adverse effect on our results of operations and financial condition.
Risks
Related to Intellectual Property
We
may not be able to obtain patents or other intellectual property rights necessary to protect our proprietary technology and business.
We
may seek to patent concepts, components, processes, designs and methods, and other inventions and technologies that we consider to have
commercial value or that will likely give us a technological advantage. Despite devoting resources to the research and development of
proprietary technology, we may not be able to develop technology that is patentable or protectable. Patents may not be issued in connection
with pending patent applications, and claims allowed may not be sufficient to allow them to use the inventions that they create exclusively.
Furthermore, any patents issued could be challenged, re-examined, held invalid or unenforceable or circumvented and may not provide sufficient
protection or a competitive advantage. In addition, despite efforts to protect and maintain patents, competitors and other third parties
may be able to design around their patents or develop products similar to our work products that are not within the scope of their patents.
Finally, patents provide certain statutory protection only for a limited period of time that varies depending on the jurisdiction and
type of patent.
Prosecution
and protection of the rights sought in patent applications and patents can be costly, lengthy and uncertain, often involve complex legal
and factual issues and consume significant time and resources. In addition, the breadth of claims allowed in our patents, their enforceability
and our ability to protect and maintain them cannot be predicted with any certainty. The laws of certain countries may not protect intellectual
property rights to the same extent as the laws of the United States. Even if our patents are held to be valid and enforceable in a certain
jurisdiction, any legal proceedings that we may initiate against third parties to enforce such patents will likely be expensive, take
significant time and divert management’s attention from other business matters. We cannot assure that any of our issued patents
or pending patent applications provide any protectable, maintainable or enforceable rights or competitive advantages to us.
In
addition to patents, we will rely on a combination of copyrights, trademarks, trade secrets and other related laws and confidentiality
procedures and contractual provisions to protect, maintain and enforce our proprietary technology and intellectual property rights in
the United States and other countries. However, our ability to protect our brands by registering certain trademarks may be limited. In
addition, while we will generally enter into confidentiality and nondisclosure agreements with our employees, consultants, contract manufacturers,
distributors and resellers and with others to attempt to limit access to and distribution of our proprietary and confidential information,
it is possible that:
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misappropriation
of our proprietary and confidential information, including technology, will nevertheless occur;
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our
confidentiality agreements will not be honored or may be rendered unenforceable;
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third
parties will independently develop equivalent, superior or competitive technology or products;
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disputes
will arise with our current or future strategic licensees, customers or others concerning the ownership, validity, enforceability,
use, patentability or registrability of intellectual property; or
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unauthorized
disclosure of our know-how, trade secrets or other proprietary or confidential information will occur.
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We
cannot assure that we will be successful in protecting, maintaining or enforcing our intellectual property rights. If we are unsuccessful
in protecting, maintaining or enforcing our intellectual property rights, then our business, operating results and financial condition
could be materially adversely affected, which could:
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adversely
affect our reputation with customers;
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be
time-consuming and expensive to evaluate and defend;
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cause
product shipment delays or stoppages;
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divert
management’s attention and resources;
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subject
us to significant liabilities and damages;
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require
us to enter into royalty or licensing agreements; or
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require
us to cease certain activities, including the sale of products.
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If
it is determined that we have infringed, violated or are infringing or violating a patent or other intellectual property right of any
other person or if we are found liable in respect of any other related claim, then, in addition to being liable for potentially substantial
damages, we may be prohibited from developing, using, distributing, selling or commercializing certain of our technologies unless we
obtain a license from the holder of the patent or other intellectual property right. We cannot assure that we will be able to obtain
any such license on a timely basis or on commercially favorable terms, or that any such licenses will be available, or that workarounds
will be feasible and cost-efficient. If we do not obtain such a license or find a cost-efficient workaround, our business, operating
results and financial condition could be materially adversely affected and we could be required to cease related business operations
in some markets and restructure our business to focus on our continuing operations in other markets.
General
Risk Factors Related to Our Business
We
may be subject to product liability claims, product actions, including product recalls, and other field or regulatory actions that could
be expensive, divert management’s attention and harm our business.
Our
business exposes us to potential liability risks, product actions and other field or regulatory actions that are inherent in the manufacturing,
marketing and sale of medical device or any other products that we may have commissioned for a target business. We may be held liable
if such products cause injury or death or is found otherwise unsuitable or defective during usage. Our products incorporate mechanical
and electrical parts, complex computer software and other sophisticated components, any of which can contain errors or failures. Complex
computer software is particularly vulnerable to errors and failures, especially when first introduced. In addition, new products or enhancements
to our existing products may contain undetected errors or performance problems that, despite testing, are discovered only after installation.
If
any of our commissioned products are defective, whether due to design or manufacturing defects, improper use of the product, or other
reasons, we may voluntarily or involuntarily undertake an action to remove, repair, or replace the product at our expense. In some circumstances
we will be required to notify regulatory authorities of an action pursuant to a product failure.
Testing
of our technologies potential applications for our products will be required and there is no assurance of regulatory approval.
The
effect of government regulation and the need for approval may delay marketing of our technologies and future potentially developed products
for a considerable period of time, impose costly procedures upon our activities and provide an advantage to larger companies that compete
with us. There can be no assurance that regulatory approval for any products developed by us will be granted on a timely basis or at
all. Any such delay in obtaining, or failure to obtain, such approvals would materially and adversely affect the marketing of any contemplated
products and the ability to earn product revenue. Further, regulation of manufacturing facilities by state, local, and other authorities
is subject to change. Any additional regulation could result in limitations or restrictions on our ability to utilize any of our technologies,
thereby adversely affecting our operations. Various federal and foreign statutes and regulations also govern or influence the manufacturing,
safety, labeling, storage, record keeping and marketing of food products. The process of obtaining these approvals and the subsequent
compliance with appropriate U.S. and foreign statutes and regulations are time-consuming and require the expenditure of substantial resources.
In addition, these requirements and processes vary widely from country to country.
We
rely on highly skilled personnel, and, if we are unable to attract, retain or motivate qualified personnel, we may not be able to operate
our business effectively.
Our
success depends in large part on continued employment of senior management and key personnel who can effectively operate our business,
as well as our ability to attract and retain skilled employees. Competition for highly skilled management, technical, research and development
and other employees is intense and we may not be able to attract or retain highly qualified personnel in the future. In making employment
decisions, particularly in the job candidates often consider the value of the equity awards they would receive in connection with their
employment. Our long-term incentive programs may not be attractive enough or perform sufficiently to attract or retain qualified personnel.
If
any of our employees leaves us, and we fail to effectively manage a transition to new personnel, or if we fail to attract and retain
qualified and experienced professionals on acceptable terms, our business, financial condition and results of operations could be adversely
affected.
Our
success also depends on our having highly trained financial, technical, recruiting, sales and marketing personnel. We will need to continue
to hire additional personnel as our business grows. A shortage in the number of people with these skills or our failure to attract them
to our company could impede our ability to increase revenues from our existing technology and services, ensure full compliance with international
and federal regulations, or launch new product offerings and would have an adverse effect on our business and financial results.
We
may be unable to keep pace with changes in technology as our business and market strategy evolves.
We
will need to respond to technological advances in a cost-effective and timely manner in order to remain competitive. The need to respond
to technological changes may require us to make substantial, unanticipated expenditures. There can be no assurance that we will be able
to respond successfully to technological change.
Risks
Related to this Offering and Our Common Stock
Even
if we meet the initial listing requirements of the Nasdaq Capital Market, there can be no assurance that we will be able to comply with
the continued listing standards of the Nasdaq Capital Market. Our failure to meet the continued listing requirements of the Nasdaq Capital
Market could result in a de-listing of our Common Stock.
Even
if we meet the initial listing requirements of the Nasdaq Capital Market, we cannot assure you that we will be able to comply with the
other standards that we are required to meet in order to maintain a listing of our common stock on the Nasdaq Capital Market. If after
listing we fail to satisfy the continued listing requirements of the Nasdaq Capital Market, such as the corporate governance requirements
or the minimum stockholder’s equity requirement, the Nasdaq Capital Market may take steps to de-list our Common Stock. Such a de-listing
would likely have a negative effect on the price of our Common Stock and would impair our shareholders’ ability to sell or purchase
our Common Stock when they wish to do so. In the event of a de-listing, we would take actions to restore our compliance with the Nasdaq
Capital Market’s listing requirements, but we can provide no assurance that any action taken by us would result in our common stock
becoming listed again, or that any such action would stabilize the market price or improve the liquidity of our Common Stock.
Shares
of our Common Stock are an illiquid investment as there is presently a limited market for our Common Stock. We do not know whether a
market for our Common Stock will be sustained or what the trading price of our Common Stock will be and as a result it may be difficult
for you to sell your shares of Common Stock.
There
is presently a limited market for our Common Stock. Although we intend to list our Common Stock on the Nasdaq Stock Market, an active
trading market for our Common Stock may not be sustained. It may be difficult for you to sell your shares of Common Stock without depressing
the market price for our Common Stock or at all. As a result of these and other factors, you may not be able to sell your shares of Common
Stock at or above the offering price or at all. Further, an inactive market may also impair our ability to raise capital by selling our
Common Stock and may impair our ability to enter into strategic partnerships or acquire companies, products, or services by using our
equity securities as consideration.
Investors
in this offering will experience immediate and substantial dilution in net tangible book value.
The
public offering price of the shares of Common Stock will be substantially higher than the net tangible book value per share of our outstanding
shares of Common Stock. As a result, investors in this offering will incur immediate dilution of $
per share based on the public offering price of $ per share of Common Stock.
Investors in this offering will pay a price per share of Common Stock that substantially exceeds the book value of our assets after subtracting
our liabilities. See “Dilution” for a more complete description of how the value of your investment will be diluted upon
the completion of this offering.
Nevada
law and provisions in our amended and restated articles of incorporation and amended and restated bylaws could make a merger, tender
offer or proxy contest difficult, thereby depressing the market price of our Common Stock.
Some
provisions of Nevada law may prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage
attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above
the prevailing market price. In addition, our amended and restated articles of incorporation and amended and restated bylaws contain
provisions that may make the acquisition of the Company more difficult, including the following:
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our
board of directors is classified into three classes of directors with staggered three-year terms;
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a
special meeting of our stockholders may only be called by either our chairman of the board or a majority of our board of directors;
and
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advance
notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting
of stockholders.
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These
provisions, alone or together, could discourage, delay or prevent a transaction involving a change in control of the Company. These provisions
could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us
to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders
to receive a premium for their shares of our Common Stock, and could also affect the price that some investors are willing to pay for
our Common Stock.
Our
management will have broad discretion over the use of proceeds from this offering and may not use the proceeds effectively.
Our
management will have broad discretion over the use of proceeds from this offering. We intend to use the net proceeds from this offering
for general corporate purposes and working capital. Our management will have considerable discretion in the application of the net proceeds,
and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
The net proceeds may be used for corporate purposes that do not improve our operating results or enhance the value of our Shares.
Our
expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition.
As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon
the completion of this offering. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors,
including amount of cash used in our operations, which can be highly uncertain, subject to substantial risks and can often change. Our
management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding
the application of the net proceeds of this offering.
The
market price of our Common Stock may be highly volatile and such volatility could cause you to lose some or all of your investment.
The
market price of our common stock, par value $0.001 per share, or Common Stock, may fluctuate significantly in response to numerous factors,
some of which are beyond our control, such as:
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the
announcement of new products or product enhancements by us or our competitors;
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developments
concerning intellectual property rights;
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changes
in legal, regulatory, and enforcement frameworks impacting our technology or the application of our technology;
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variations
in our and our competitors’ results of operations;
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fluctuations
in earnings estimates or recommendations by securities analysts, if our Common Stock is covered by analysts;
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the
results of product liability or intellectual property lawsuits;
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future
issuances of Common Stock or other securities;
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the
addition or departure of key personnel;
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announcements
by us or our competitors of acquisitions, investments or strategic alliances; and
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general
market conditions and other factors, including factors unrelated to our operating performance.
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Further,
the general stock market has recently experienced price and volume fluctuations. The volatility of our Common Stock could be further
exacerbated due to low trading volume. Continued market fluctuations could result in extreme volatility in the price of our Common Stock,
which could cause a decline in the value of our Common Stock and the loss of some or all of our investors’ investment. Sales of
shares of our Common Stock could also depress the then price of our shares.
We
will incur significant increased costs as a result of the listing of our securities for trading on Nasdaq and our management will be
required to devote substantial time to new compliance initiatives as well as compliance with ongoing U.S. requirements.
Upon
the listing of our Common Stock on Nasdaq, we will become a publicly traded company in the United States. We anticipate that we will
incur costs associated with corporate governance requirements of the SEC and Nasdaq, as well as requirements under Section 404 and other
provisions of the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal and financial compliance costs, introduce
new costs such as investor relations, stock exchange listing fees and shareholder reporting, and to make some activities more time consuming
and costly. The implementation and testing of such processes and systems may require us to hire outside consultants and incur other significant
costs and resources, particularly a greater percentage of the time and efforts of our management team will be diverted to these new requirements.
Any future changes in the laws and regulations affecting public companies in the United States, including Section 404 and other provisions
of the Sarbanes-Oxley Act, and the rules and regulations adopted by the SEC and Nasdaq, for so long as they apply to us, will result
in increased costs to us as we respond to such changes. These laws, rules and regulations could make it more difficult or more costly
for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements
could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees,
or as executive officers.
Because
our Common Stock may be a “penny stock,” it may be more difficult for investors to sell shares of our Common Stock, and the
market price of our Common Stock may be adversely affected.
Our
Common Stock may be a “penny stock” if, among other things, the stock price is below $5.00 per share, it is not listed on
a national securities exchange, or it has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell
penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This risk-disclosure
document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A
broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation,
make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written
agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer
a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation
of the penny stock rules, the investor may be able to cancel its purchase and get their money back.
If
applicable, the penny stock rules may make it difficult for stockholders to sell their shares of our Common Stock. Because of the rules
and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our Common Stock may be adversely
affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, stockholders may not always be able
to resell their shares of our Common Stock publicly at times and prices that they feel are appropriate.
Compliance
with the reporting requirements of federal securities laws can be expensive.
We
are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange
Act and other federal securities laws. The costs of preparing and filing annual and quarterly reports and other information with the
SEC and furnishing audited reports to stockholders are substantial. Failure to comply with the applicable securities laws could result
in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business
and financials, the value of our stock, and the ability of stockholders to resell their stock.
Our
investors’ ownership in the Company may be diluted in the future.
In
the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests
of our present stockholders. For instance, pursuant to that certain Securities Exchange Agreement by and between Intellisense and Medigus,
dated September 16, 2019, if ScoutCam achieves $33.0 million in sales in the aggregate within the first three years following December
30, 2019, the consummation date of such agreement, we will issue shares of Common Stock to Medigus representing 10% of our issued and
outstanding share capital as of December 30, 2019. Similarly, we may issue a substantial number of shares of Common Stock or other securities
convertible into or exercisable for Common Stock in connection with capital raising activity, hiring or retaining employees, future acquisitions,
raising additional capital in the future to fund our operations, and other business purposes. We expect to authorize in the future a
substantial number of shares of our Common Stock for issuance under a stock option or similar plan, and may issue equity awards to management,
employees and other eligible persons. Additional shares of Common Stock issued by us in the future will dilute an investor’s investment
in the Company. In addition, we may seek stockholder approval to increase the amount of the Company’s authorized stock, which would
create the potential for further dilution of current investors.
Directors,
executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make
decisions that our stockholders do not consider to be in their best interests.
As
of June 23, 2021, our directors, executive officers, principal stockholders and affiliated entities may be deemed to beneficially own,
in the aggregate, approximately 78.64% of our outstanding voting securities as of the date hereof. As a result, if some or all of such
parties acted together, they would have the ability to exert substantial influence over the election of our board of directors and the
outcome of issues requiring approval by our stockholders. This concentration of ownership may also have the effect of delaying or preventing
a change in control of the Company that may be favored by other stockholders. This could prevent transactions in which stockholders might
otherwise recover a premium for their shares over current market prices. This concentration of ownership and influence in management
and board decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from
seeking to acquire shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control
of our Company.
We
do not anticipate paying any cash dividends in the foreseeable future.
We
have never declared or paid cash dividends, and we do not anticipate paying cash dividends in the foreseeable future. Therefore, you
should not rely on an investment in our Common Stock as a source for any future dividend income. Our board of directors has complete
discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount
and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus,
the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other
factors deemed relevant by our board of directors.
Risks
Related to our Operations in Israel
Political,
economic and military instability in Israel may impede our ability to operate and harm our financial results.
Our
offices and management team are located in Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding
region may directly affect our business and operations. In recent years, Israel has been engaged in sporadic armed conflicts with Hamas,
an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of
southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran has threatened to attack Israel and may be developing
nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various
parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions
in Israel. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could
adversely affect our operations and results of operations.
Our
commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli
government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot
assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages
incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would
likely negatively affect business conditions and could harm our results of operations.
Further,
in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business
with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating
results, financial condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against
Israel, which could also adversely impact our business.
In
addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year
until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event
of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant
call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could
be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely
affect our business, prospects, financial condition and results of operations.
It
may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers.
It
may be difficult to acquire jurisdiction and enforce liabilities against any of our officers and directors who are based in Israel. It
may not be possible for United States investors to enforce their legal rights, to effect service of process upon our directors or officers
or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers
under federal securities laws. Moreover, we have been advised that Israel does not have treaties providing for the reciprocal recognition
and enforcement of judgments of courts with the United States. Further, it is unclear if extradition treaties now in effect between the
United States and Israel would permit effective enforcement of criminal penalties of the federal securities laws. Even if an Israeli
court agrees to hear a claim, it may determine that the Israeli law, and not U.S. law, is applicable to the claim. Further, if U.S. law
is found to be applicable, certain content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly
process, and certain matters of procedure would still be governed by the Israeli law. Consequently, you may be effectively prevented
from pursuing remedies under U.S. federal and state securities laws against us or any of our non-U.S. directors or officers.
Exchange
rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings.
Our
reporting and functional currency is the U.S. dollar. Our revenues are currently primarily payable in U.S. dollars and we expect our
future revenues to be denominated primarily in U.S. dollars. However, some of our expenses are in NIS and as a result, we are exposed
to the currency fluctuation risks relating to the recording of our expenses in U.S. dollars. We may, in the future, decide to enter into
currency hedging transactions. These measures, however, may not adequately protect us from material adverse effects.
We
may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result
in litigation and adversely affect our business.
A
significant portion of ScoutCam’s intellectual property has been developed by ScoutCam’s employees in the course of their
employment for us. Under the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee in the course and
as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to
the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent
Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee,
or the Committee, a body constituted under the Patent Law, will determine whether the employee is entitled to remuneration for his inventions.
Recent case law clarifies that the right to receive consideration for “service inventions” can be waived by the employee
and that in certain circumstances, such waiver does not necessarily have to be explicit. The Committee will examine, on a case-by-case
basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further,
the Committee has not yet determined one specific formula for calculating this remuneration (but rather uses the criteria specified in
the Patent Law). Although we generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals
assign to us all rights to any inventions created in the scope of their employment or engagement with us, we may face claims demanding
remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration
or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some
of the statements made in this prospectus may constitute forward-looking statements within the meaning of the United States federal securities
laws. The use of the words “projects,” “expects,” “may,” “plans,” or “intends,”
or words of similar import, identifies a statement as “forward-looking.” The forward-looking statements contained herein
represent our expectations, beliefs, intentions or strategies concerning future events that may affect our business, financial condition,
results of operations and prospects. Many factors could cause our actual performance or results to differ materially from the performance
and results to differ materially from those expressed in or suggested by forward-looking statements. These factors include, but are not
limited to:
|
●
|
our
ability to meet the initial listing requirements of the Nasdaq Capital Market and to comply with the continued listing standards
of the Nasdaq Capital Market;
|
|
|
|
|
●
|
our
financial performance, including our history of operating losses;
|
|
|
|
|
●
|
our
ability to obtain additional funding to continue our operations;
|
|
|
|
|
●
|
our
ability to successfully develop and commercialize our products;
|
|
|
|
|
●
|
changes
in the regulatory environments of the United States and other countries in which we intend to operate;
|
|
|
|
|
●
|
our
ability to attract and retain key management and marketing personnel;
|
|
|
|
|
●
|
competition
from new market entrants; and
|
|
|
|
|
●
|
our
ability to identify and pursue development of additional products.
|
The
outcome of the events described in forward-looking statements are subject to risks, uncertainties, assumptions and other factors, including
those described in this prospectus under “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties
that could have an impact on the forward-looking statements herein.
You
should not rely on forward-looking statements as predictions of future events. Except as required by law, neither we nor any other person
assumes responsibility for the accuracy and completeness of forward-looking statements, and we undertake no obligation to update any
forward-looking statements to reflect events or circumstances after the date of this prospectus.
USE OF PROCEEDS
We
estimate that the net proceeds from this offering will be approximately $ million (approximately
$ million if the underwriters exercise their over-allotment option in full), based upon an assumed
public offering price of $ per share of Common Stock, the last reported sales price of our
Common Stock on the OTCQB on , 2021, after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us. The actual offering price per share of Common Stock in this offering will
be determined between us and the underwriters at the time of pricing, and may be at a discount to the current market price for our Common
Stock.
A
$0.10 increase (decrease) in the assumed aggregate public offering price of $ per share
of Common Stock, would increase (decrease) the net proceeds we receive from this offering by $ ,
assuming that the number of shares of Common Stock offered by us, as set forth on the cover page of this prospectus, remains the same
and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase
or decrease the number of shares of Common Stock we are offering.
A
100,000 share increase in the number of shares of Common Stock offered hereby, together with a concomitant $0.10 increase in the assumed
aggregate public offering price of $ per share of Common Stock, would increase the net
proceeds we receive from this offering by $ , after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us. Conversely, a 100,000 share decrease in the number of shares
of Common Stock offered hereby, together with a concomitant $0.10 decrease in the assumed aggregate public offering price of $
per share of Common Stock, would decrease the net proceeds we receive from this offering by $ ,
after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We
currently intend to use the net proceeds from this offering for working capital and general corporate purposes. As a result, our management
will retain broad discretion in the allocation and use of the net proceeds of this offering, and investors will be relying on the judgment
of our management with regard to the use of these net proceeds. The precise amount use and timing of the application of such proceeds
will depend upon our funding requirements and the availability and cost of other capital. Pending application of the net proceeds for
the purposes as described above, we expect to invest the net proceeds in short-term, interest-bearing securities, investment grade securities,
certificates of deposit or direct or guaranteed obligations of the U.S. government.
DIVIDEND
POLICY
We
do not anticipate declaring or paying any cash dividends to holders of our stockholders in the foreseeable future. We currently intend
to retain future earnings, if any, to finance the growth of our business. If we decide to pay cash dividends in the future, the declaration
and payment of such dividends will be at the sole discretion of our board of directors and may be discontinued at any time. In determining
the amount of any future dividends, our board of directors will take into account any legal or contractual limitations, our actual and
anticipated future earnings, cash flow, debt service and capital requirements and other factors that our board of directors may deem
relevant.
CAPITALIZATION
The
following table sets forth our capitalization:
|
●
|
on
an actual basis as of March 31, 2021; and
|
|
●
|
on
an as adjusted basis, to give effect to the issuance and sale in this offering of shares
of Common Stock at the assumed public offering price of $
per share of Common Stock, the last reported sales price of our shares of Common Stock on the OTCQB on ,
2021, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
The
information set forth in the following table should be read in conjunction with, and is qualified in its entirety by, reference to our
audited and unaudited financial statements and the notes thereto included herein.
|
|
As
of March 31, 2021
|
|
|
|
Actual
|
|
|
As
adjusted
|
|
|
|
(U.S. Dollars,
in thousands)
|
|
Cash and cash equivalents
|
|
|
12,751
|
|
|
|
|
|
Total Liabilities
|
|
|
4,093
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 300,000,000
shares authorized and 60,295,245 shares issued and outstanding as of March 31, 2021
|
|
|
60
|
|
|
|
|
|
Additional paid-in capital
|
|
|
30,189
|
|
|
|
|
|
Accumulated deficit
|
|
|
(7,913
|
)
|
|
|
|
|
Total equity
|
|
|
22,336
|
|
|
|
|
|
Total capitalization and indebtedness
|
|
|
26,429
|
|
|
|
|
|
A
$0.10 increase (decrease) in the assumed aggregate public offering price of $ per share
of Common Stock would increase (decrease) the as adjusted amount of each of cash and cash equivalents and total stockholders’ equity
by approximately $ , assuming that the number of shares of Common Stock, as set forth on the
cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us. A 100,000 share increase in the number of shares of Common Stock offered by us, together with a concomitant $0.10
increase in the assumed aggregate public offering price of $ per share of Common
Stock, would increase our as adjusted cash and cash equivalents by approximately $ after
deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Conversely, a 100,000 share
decrease in the number of shares of Common Stock offered by us, together with a concomitant $0.10 decrease in the assumed aggregate public
offering price of $ per share of Common Stock, would decrease our as adjusted cash
and cash equivalents by approximately $ after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
The
preceding table excludes as of March 31, 2021: (i) 6,353,785 shares of Common Stock issuable upon the exercise of outstanding options
at a weighted average exercise price of $0.31 per share; (ii) 38,051,770 shares of Common Stock issuable upon the exercise of warrants
to purchase up to an aggregate of 38,051,770 shares of Common Stock at a weighted average exercise price of $1.026 per share of Common
Stock; and (iii) 2,688,492 shares of Common Stock issuable to Medigus if ScoutCam Ltd. achieves an aggregate amount of $33 million in
sales within the first three years immediately after the Exchange Agreement (as defined herein), which represents 10% of the Company’s
issued and outstanding share capital as of the closing of the Exchange Agreement.
DILUTION
If
you invest in our Shares in this offering, your ownership interest will be immediately diluted to the extent of the difference between
the public offering price per share of Common Stock and the as adjusted net tangible book value per share of Common Stock after this
offering.
Our
net tangible book value as of March 31, 2021, was approximately $0.44. Our net tangible book value per share of Common Stock represents
the amount of our total tangible assets less total liabilities divided by the total number of shares of our Common Stock outstanding
as of March 31, 2021.
After
giving effect to the issuance and sale in this offering of
shares of Common Stock at an assumed public offering price of $ per share
of Common Stock, the last reported sales price of our Common Stock on the OTCQB on ,
2021, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted
net tangible book value on March 31, 2021, would have been approximately $ million,
or $ per share of Common Stock. This represents an immediate dilution in the as adjusted net
tangible book value of $ per share of Common Stock to investors
purchasing our Common Stock in this offering.
The
following table illustrates this calculation on a per share basis:
Assumed offering price per share
of Common Stock
|
|
|
|
|
|
$
|
|
|
Net tangible book value
per share of Common Stock
|
|
$
|
|
|
|
|
|
|
Decrease
in net tangible book value per share of Common Stock attributable to the offering
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As-adjusted net tangible
book value per share of Common Stock after giving effect to the offering
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Dilution in net tangible book value per
share of Common Stock to new investors
|
|
|
|
|
|
$
|
|
|
The
preceding table excludes as of March 31, 2021: (i) 6,353,785 shares of Common Stock issuable upon the exercise of outstanding options
at a weighted average exercise price of $0.31 per share; (ii) 38,051,770 shares of Common Stock issuable upon the exercise of warrants
to purchase up to an aggregate of 38,051,770 shares of Common Stock at a weighted average exercise price of $1.026 per share of Common
Stock; and (iii) 2,688,492 shares of Common Stock issuable to Medigus if ScoutCam Ltd. achieves an aggregate amount of $33 million in
sales within the first three years immediately after the Exchange Agreement (as defined herein), which represents 10% of the Company’s
issued and outstanding share capital as of the closing of the Exchange Agreement.
The
above illustration of dilution per share to investors participating in this offering assumes no exercise of outstanding options to purchase
our Common Stock or outstanding warrants to purchase our Common Stock. To the extent outstanding options or warrants are exercised, you
may incur further dilution.
A
$0.10 increase (decrease) in the assumed aggregate public offering price of $
per share of Common Stock would increase (decrease) our as adjusted net tangible book value per share of Common Stock after this offering
by $ and the dilution per share of Common Stock to new investors by $ ,
assuming the number of shares of Common Stock offered by us, as set forth on the cover page of this prospectus, remains the same, after
deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or
decrease the number of shares of Common Stock we are offering. A 100,000 share increase in the number of Common Stock offered by us,
together with a concomitant $0.10 increase in the assumed aggregate public offering price of $
per share of Common Stock, would increase our as adjusted net tangible book value per share of Common Stock after this offering by $
and the dilution per share of Common Stock to new investors by $ , after
deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Conversely, a 100,000 share
decrease in the number of shares of Common Stock offered by us, together with a concomitant $0.10 decrease in the assumed aggregate public
offering price of $ per share of Common Stock. would decrease our as adjusted
net tangible book value per share of Common Stock after this offering by $
and the dilution per share of Common Stock to new investors by $ ,
after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
MARKET
FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
Common Stock is quoted on the OTCQB under the symbol “SCTC”. Trading in stocks quoted on the OTCQB is often thin and is characterized
by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects.
We cannot assure you that there will be a market in the future for our common stock.
OTCQB
securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTCQB securities transactions
are conducted through a telephone and computer network connecting dealers in stocks. OTCQB issuers are traditionally smaller companies
that do not meet the financial and other listing requirements of a regional or national stock exchange.
We
have applied to list our Common Stock on the Nasdaq Capital Market under the same symbol (“SCTC”). No assurance can be given
that our application will be approved or that a trading market will develop. The approval of our listing of our Common Stock on Nasdaq
is a condition of closing this offering.
Holders
As
of June 24, 2021, there were 68 stockholders of record of our Common Stock and 61,342,216 shares of our Common Stock outstanding.
The number of stockholders of record does not include beneficial owners of our Common Stock, whose shares are held in “street name”
in the names of various brokers, dealers, clearing agencies, banks, and other fiduciaries.
Dividends
We
have never declared or paid any cash dividends on our Common Stock. We currently intend to retain future earnings, if any, to increase
our working capital and do not anticipate paying any cash dividends in the foreseeable future.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial condition and results of operations together with our financial statements
and the related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions. See “Special Note on Forward-Looking Statements”
for a discussion of the uncertainties and assumptions associated with these statements. Our actual results may differ materially from
those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below,
and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus.
Comparison
of the Quarter Ended March 31, 2021 and the Quarter Ended March 31, 2020
Overview
The
Company’s primary business activity during last few months related to the completion of R&D in connection with a customer-specific
project and the transition to the production stage with respect to a contract with a Fortune 500 Multinational Healthcare Corporation,
while expanding the R&D team to enable additional projects in parallel. The main effect of this activity was the increase in the
number of employees to enable the Company to manage the anticipated increased workload.
Other
major activities were the following:
|
-
|
expanding
marketing activities, including the recruitment of a Director of Business Development in the US, and launching a multi-platform digital
marketing campaign;
|
|
-
|
extensive
activity in connection with the Company’s IP, including submissions of new patent applications as well as maintenance, defense,
and commercialization efforts of existing patents;
|
|
-
|
increased
operation expenses in order to improve the current Company’s R&D capabilities; and
|
|
-
|
investment
in capital expenses to provide the necessary facilities, IT, and lab tools for our newly recruited employees and to upgrade the Company’s
production and quality control capabilities.
|
The
following table summarizes our results of operations for the three month period ended March 31, 2021 and 2020, together with the changes
in those items in dollars and as a percentage:
|
|
2021
|
|
|
2020
|
|
|
%
Change
|
|
Revenues
|
|
|
24,000
|
|
|
|
40,000
|
|
|
|
(40
|
)%
|
Cost of Revenues
|
|
|
203,000
|
|
|
|
130,000
|
|
|
|
56
|
%
|
Gross Loss
|
|
|
(179,000
|
)
|
|
|
(90,000
|
)
|
|
|
99
|
%
|
Research and development expenses
|
|
|
333,000
|
|
|
|
255,000
|
|
|
|
31
|
%
|
Sales and marketing expense
|
|
|
145,000
|
|
|
|
52,000
|
|
|
|
179
|
%
|
General and administrative
expenses
|
|
|
933,000
|
|
|
|
1,112,000
|
|
|
|
(16
|
)%
|
Operating Loss
|
|
|
(1,590,000
|
)
|
|
|
(1,509,000
|
)
|
|
|
5
|
%
|
Revenues
For
the three months ended March 31, 2021, ScoutCam generated revenues of $24,000, a decrease of $16,000 from the three months ended March
31, 2020.
The
decrease in revenues was primarily due to an overall decrease 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, 2021 was $203,000, an increase of $73,000 compared to cost of revenues of $130,000 for
the three months ended March 31, 2020.
The
increase in cost of revenues was due to an increase in payroll expenses as a result of hiring additional production employees and the
establishment of an engineering department as part of our ongoing transition from R&D to production.
Gross
Loss
Gross
loss for the three months ended March 31, 2021 was $179,000, an increase of $89,000 compared to gross loss of $90,000 for the three months
ended March 31, 2020.
Research
and Development Expenses
Research
and development expenses for the three months ended March 31, 2021, were $333,000, an increase of $78,000, or 31%, compared to $255,000
for the three months ended March 31, 2020. The increase was primarily due to increase in materials and subcontractors. The increase was
primarily due to an increase in research and development activities as described under “Overview”.
Sales
and Marketing Expenses
Sales
and marketing expenses for the three months ended March 31, 2021, were $145,000, an increase of $93,000, or 179%, compared to $52,000
for the three months ended March 31, 2020. The increase was primarily due to an increase in marketing activities as described under “Overview”.
General
and Administrative Expenses
General
and Administrative expenses for the three months ended March 31, 2021, were $933,000, a decrease of $179,000, or 16%, compared to $1,112,000
for the three months ended March 31, 2020. The decrease was primarily due to a decrease in share - based compensation expenses, which
was partially offset by an increase in payroll expenses due to the hiring of additional employees.
Operating
loss
We
incurred an operating loss of $1,590,000 for the three months ended March 31, 2021, an increase of $81,000, or 5%, compared to operating
loss of $1,509,000 for the three months ended March 31, 2020. The increase in operating loss was due to an $89,000 increase in gross
loss, $78,000 increase in research and development expenses, and $93,000 increase in sales and marketing expenses, which collectively
were partially offset by a $179,000 decrease in administrative and general expenses.
Cash
Flows
The
following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):
|
|
Three
months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash used in Operating Activity
|
|
|
(774,000
|
)
|
|
|
(1,137,000
|
)
|
Cash used in Investing Activity
|
|
|
(117,000
|
)
|
|
|
(185,000
|
)
|
Cash provided by Financing Activity
|
|
|
10,281,000
|
|
|
|
828,000
|
|
Operating
Activities
For
the three months ended March 31, 2021, net cash flows used in operating activities was $774,000, due primarily to a net loss of $1,606,000,
partially offset by change in operating asset and liabilities of approximately $724,000.
Investing
Activities
For
the three months ended March 31, 2021, net cash flows used in investing activities was $117,000, due primarily to the purchase of property
and equipment.
Financing
Activities
For
the three months ended March 31, 2021, net cash flows provided by financing activities was $10,281,000, due primarily to proceeds from
the issuance of shares and warrants equivalent to approximately $9,500,000 and proceeds from exercise from warrants of approximately
$781,000.
Comparison
of the Year Ended December 31, 2020 and the Year Ended December 31, 2019
Overview
The
Company’s primary business activity during 2020 was the completion of R&D and the transition to the production stage with respect
to a contract with a Fortune 500 Multinational Healthcare Corporation, while expanding the R&D team to enable additional projects
in parallel. The main effect of this activity was the increase in the number of employees from 19 at the end of 2019 to 27 at the end
of 2020 to enable the Company to manage the anticipated increased workload.
Other
major activities in 2020 were the following:
|
-
|
Expanding
marketing activities, including the recruitment of a Director of Business Development in the US, and launching a multi-platform digital
marketing campaign.
|
|
-
|
Extensive
activity around the Company’s IP, including submissions of new patent applications as well as maintenance, defense, and commercialization
efforts of existing patents.
|
|
-
|
On
December 30, 2019, upon the completion of the Exchange Agreement (as defined herein), the Company transitioned from a shell company
to an operating company. This turn led to, among other, an increase in professional services (legal counsels, accountants, SOX consultants,
etc.), fees and related costs in connection with ScoutCam Inc.’s post-Closing Date Board of Directors, increases in D&O
insurance, etc.
|
|
-
|
Increase
in the operation expenses in order to improve the current Company’s R&D capabilities.
|
|
-
|
Investment
in capital expenses to provide the necessary facilities, IT, and lab tools for the newly recruited employees and to upgrade the Company’s
production and quality control capabilities.
|
The
following table summarizes our results of operations for the years ended December 31, 2020 and 2019, together with the changes in those
items in dollars and as a percentage:
|
|
2020
|
|
|
2019
|
|
|
%
Change
|
|
Revenues
|
|
|
491,000
|
|
|
|
309,000
|
|
|
|
59
|
%
|
Cost
of Revenues
|
|
|
994,000
|
|
|
|
542,000
|
|
|
|
83
|
%
|
Gross
Loss
|
|
|
(503,000
|
)
|
|
|
(233,000
|
)
|
|
|
116
|
%
|
Research
and development expenses
|
|
|
725,000
|
|
|
|
274,000
|
|
|
|
165
|
%
|
Sales
and marketing expense
|
|
|
443,000
|
|
|
|
183,000
|
|
|
|
142
|
%
|
General
and administrative expenses
|
|
|
3,035,000
|
|
|
|
1,117,000
|
|
|
|
172
|
%
|
Operating
Loss
|
|
|
(4,706,000
|
)
|
|
|
(1,807,000
|
)
|
|
|
160
|
%
|
Revenues
For
the year ended December 31, 2020, we generated revenues of $491,000, an increase of $182,000 or 59%, from 2019 revenues.
The
increase in revenues was primarily due to the sale of products to A.M. Surgical (see “Customer A” as described in Note 11b
of our financial statements). Total revenues recorded from A.M. Surgical during 2020 amounted to approximately $383,000. Total revenues
we recorded from A.M. Surgical during 2019 amounted to approximately $85,000. This increase was partially offset by decrease in revenues
to other customers due to:
|
a)
|
the
COVID-19 pandemic impact on global markets and the global economy, including countries and industries in which the Company operates;
|
|
|
|
|
b)
|
most
of the revenues for year ended December 31, 2019 were derived from sales of miniature camera and related equipment to occasional
customers. The Company’s management has decided to reduce sales to occasional customers and focus on larger projects. Our current
business model is that of a B2B approach, in which we seek to identify target businesses interested in integrating our micro ScoutCam™
technology, or commissioning individual projects using our technology.
|
|
|
Remaining
Performance Obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred
revenue and amounts that will be invoiced and recognized as revenue in future periods. As of December 31, 2020, the total RPO amounted
to $2.9 million, which we expect to recognize over the expected manufacturing term of the product under development.
|
Cost
of Revenues
Cost
of revenues for the year ended December 31, 2020 were $994,000, an increase of $452,000, or 83%, compared to cost of revenues of $542,000
for the year ended December 31, 2019.
The
increase in cost of revenues was due to:
|
a)
|
Increase
in revenues as described above;
|
|
|
|
|
b)
|
changes
in products and services mix; and
|
|
|
|
|
c)
|
increase
in payroll expenses as a result of hiring additional employees.
|
Gross
Loss
Gross
loss for the year ended December 31, 2020 was $503,000, an increase of $270,000 compared to a gross loss of $233,000 for the year ended
December 31, 2019. Gross loss is impacted by several factors, including shifts in product mix, sales volume, fluctuations in manufacturing
costs, labor costs, and pricing strategies.
Research
and Development Expenses
Research
and development expenses for the year ended December 31, 2020, were $725,000, an increase of $451,000, or 165%, compared to $274,000
for the year ended December 31, 2019. The increase was primarily due to a $231,000 increase in payroll expenses and a $205,000 increase
in materials and subcontractors. The increase in payroll expenses resulted from an increase in share - based compensation expenses (see
note 9 to our financial statements for the year ended December 31, 2020) and hiring additional employees. The increase in materials and
subcontractors was primarily due to an increase in research and development activities as described under “Overview”.
Sales
and Marketing Expenses
Sales
and marketing expenses for the year ended December 31, 2020, were $443,000, an increase of $260,000, or 142%, compared to $183,000 for
the year ended December 31, 2019. The increase was primarily due to an increase in marketing activities as described under “Overview”.
General
and Administrative Expenses
General
and Administrative expenses for the year ended December 31, 2020, were $3,035,000, an increase of $1,918,000, or 172%, compared to $1,117,000
for the year ended December 31, 2019. The increase was primarily due to a $767,000 increase in payroll expenses, as a result of an increase
in share - based compensation expenses (see note 9 to our financial statements for the year ended December 31, 2020) and hiring additional
employees and a $826,000 increase in professional services. The increase in professional services was primarily due to an increase in
share - based compensation expenses, as result from the incorporation of the Subsidiary as an independent company and in connection with
the execution of that certain securities exchange agreement involving the Subsidiary and increase in patent expenses as described under
“Overview”.
Operating
loss
We
incurred an operating loss of $4,706,000 for the year ended December 31, 2020, an increase of $2,899,000, or 160%, compared to operating
loss of $1,807,000 for the year ended December 31, 2019. The increase in operating results was due to an increase of $270,000 in gross
loss, an increase of $451,000 in research and development expenses, an increase of $260,000 in sales and marketing expenses and increase
of $1,918,000 in administrative and general expenses.
Liquidity
and Capital Resources
We
generated liquidity primarily from fund raising and warrant exercises as described at note 9 to our financial statements for the year
ended December 31, 2020.
During
2020, we received proceeds from fund raising in the aggregate approximate amount of $2.9 million, net of issuance expenses and $1.7 million
from warrants exercise.
On
March 29, 2021, we issued to certain investors, including M. Arkin (1999) Ltd., a major stockholder of our company, of which Mori Arkin,
a director of our company, is the owner, 22,222,223 units in exchange for an aggregate purchase price of $20 million. Each such unit
consisted of (i) one share of Common Stock and (ii) one warrant to purchase one share of Common Stock with an exercise price of $1.15
per share. Each such warrant is exercisable until the close of business on March 31, 2026. Pursuant to the terms of the foregoing warrants,
following April 1, 2024, if the closing price of the Common Stock equal or exceeds 135% of the aforementioned exercise price (subject
to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions after the issue date
of the warrants) for any thirty (30) consecutive trading days, we may force the exercise of the warrants, in whole or in part, by delivering
a notice of forced exercise. The shares of Common Stock and the warrants were issued to such investors pursuant to Regulation S of the
Securities Act of 1933, as amended. The securities issued in connection with the foregoing investment, including the shares of Common
Stock issuable upon exercise of the warrants, were registered by us for resale under a registration statement on Form S-1 declared effective
on May 10, 2021.
As
of March 31, 2021, our total assets were $26,429,000. As of December 31, 2020, our total assets were $5,895,000. The increase of assets
was mainly due to an increase of cash and cash equivalents and increase of receivables on account of issuance of shares due to fundraising
activities. As of March 31, 2021, our total liabilities were $4,093,000. As of December 31, 2020, our total liabilities were $1,931,000.
The increase of liabilities was mainly due to an increase of accounts payables, contract liabilities and other accrued compensation expenses.
Since
incorporation through March 31, 2021, we incurred accumulated deficit of approximately $7.9 million. Our cash and cash equivalents as
of March 31, 2021 will allow us to fund our operating plan through at least the next 12 months. However, we expect to continue to incur
significant research and development expenses and other costs related to our ongoing operations; and in order to continue our future
operations, we will need to obtain additional funding until we become profitable.
Cash
Flows
The
following table sets forth the significant sources and uses of cash for the years ended December 31, 2020 and December 31, 2021 (in dollars):
|
|
2020
|
|
|
2019
|
|
Cash used in Operating Activity
|
|
|
(4,187,000
|
)
|
|
|
(1,799,000
|
)
|
Cash used in Investing Activity
|
|
|
(276,000
|
)
|
|
|
(55,000
|
)
|
Cash provided by Financing Activity
|
|
|
4,506,000
|
|
|
|
5,104,000
|
|
Operating
Activities
For
the fiscal year ended December 31, 2020, net cash flows used in operating activities was $4,187,000, due primarily to a net loss of $4,667,000,
change in operating asset and liabilities of approximately $612,000, partially offset by share based compensation expenses (non-cash
item) of approximately $1,107,000.
Investing
Activities
For
the fiscal year ended December 31, 2020, net cash flows used in investing activities was $276,000, due primarily to purchase of property
and equipment.
Financing
Activities
For
the fiscal year ended December 31, 2020, net cash flows provided by financing activities was $4,506,000, due primarily to proceeds from
issuance of shares and warrants of approximately $2,858,000 and proceeds from exercise from warrants of approximately $1,729,000.
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
None.
BUSINESS
Overview
We
are engaged in the development, production and marketing of innovative miniaturized imaging equipment known as our micro ScoutCam™
technology for use in medical procedures as well as various applications in other industries. Our current business model is that of a
business-to-business (B2B) approach, in which we seek to identify target businesses interested in integrating our micro ScoutCam™
technology, or commissioning individual projects using our technology. As of the date of this prospectus, we derive a substantial portion
of our revenue from applications of our micro ScoutCam™ technology within the medical, defense and aerospace fields. We have recently
begun examining additional applications for our micro ScoutCam™ portfolio outside of the foregoing industries, including sectors
such as, inter alia, automotive, industrial non-destructing-testing industries, and predictive maintenance (i.e. Industry 4.0) based
on Internet of Things (IoT). We plan to further expand the activity in these non-medical spaces.
Pictured
above (from left to right) are the Company’s micro ScoutCamTM 1.0 Lum and micro ScoutCam™ 1.2.
The
Company’s eye-endoscope, which includes a camera at the distal tip, integrated illumination and embedded irrigation, which is only
1.2 mm in outer diameter.
Our
Corporate History and Background
We
were incorporated as a corporation under the laws of the State of Nevada on March 22, 2013 under the name Intellisense Solutions Inc.
We were initially engaged in the business of developing web portals to allow companies and individuals to engage in the purchase and
sale of vegetarian food products over the Internet. However, we were unable to execute our original business plan, develop significant
operations or achieve commercial sales.
We
received initial funding in March 2014 in the aggregate amount of $19,980 through the sale of Common Stock to two of our former officers
and directors, who purchased in the aggregate 1,998,000 shares of our Common Stock at $0.01 per share.
On
January 10, 2019, we formed Canna Patch Ltd., or Canna Patch, an Israeli corporation, of which 90% was initially owned by our Company,
and the remaining 10% owned by Rafael Ezra, Canna Patch’s Chief Technology Officer. Canna Patch did not have any operations and
on December 4, 2019, we sold 100% of our holdings in Canna Patch.
On
September 16, 2019, Intellisense and Medigus entered into that certain Exchange Agreement (as defined herein). For additional information
about the Exchange Agreement, refer to “—Certain Relationships and Related Party Transactions” below.
On
December 30, 2019, we acquired ScoutCam Ltd. As a result of our acquisition of ScoutCam Ltd., we now own all of ScoutCam Ltd.’s
issued and outstanding share capital. We plan to integrate and fully adopt ScoutCam Ltd.’s business into our Company as our primary
business activity.
ScoutCam
Ltd. was formed in the State of Israel on January 3, 2019 as a wholly-owned subsidiary of Medigus, an Israeli company traded on the Nasdaq
Capital Market, and commenced operations on March 1, 2019. ScoutCam Ltd. was incorporated as part of a reorganization of Medigus, which
was designed to distinguish ScoutCam Ltd.’s miniaturized imaging business, or the micro ScoutCam™ portfolio, from Medigus’
other operations and to enable Medigus to form a separate business unit with dedicated resources focused on the promotion of such technology.
On December 1, 2019, Medigus and ScoutCam Ltd. consummated a certain Amended and Restated Asset Transfer Agreement, which transferred
and assigned certain assets and intellectual property rights related to its miniaturized imaging business. For additional information
about the Amended and Restated Asset Transfer Agreement, refer to “—Certain Relationships and Related Party Transactions”
below. On May 18, 2020, in connection with the Arkin Transaction (as defined below), the Company and Medigus entered into a certain Side
Letter Agreement (the “Letter Agreement”), whereby the parties agreed to amend certain terms of the Amended and Restated
Asset Transfer Agreement and the License Agreement. For additional information about the Letter Agreement, refer to “—Certain
Relationships and Related Party Transactions” below.
On
April 20, 2020, ScoutCam Ltd. entered into an Amended and Restated Intercompany Services Agreement with Medigus (the “Intercompany
Services Agreement”), which effectively amended and restated an intercompany services agreement dated May 30, 2019. For additional
information about the Intercompany Services Agreement, refer to “—Certain Relationships and Related Party Transactions”
below.
Sales
and Marketing
Our
vision is to improve the performance of organizations by offering prestigious tools that enhance the visual technological capabilities
of companies across a variety of industries. Our mission is to become a global leader providing innovative, off-the-shelf and custom-tailored
visualization solutions to organizations across a variety of industries based on small and highly resistant cameras and supplementary
technologies. Since we are focused on custom-tailored solutions, we have a very limited offering of off-the-shelf products, which are
used mainly as demonstrators for new prospects of our technology and capabilities, rather than as a major source of revenue. Moreover,
as we focus only on the visualization apparatus and supporting components, including for example a small camera (that consists of a miniature
CMOS video sensor, optics, filters, electronics, housing and cables), illumination, cleaning methods (e.g., irrigation), and/or a mechanical
structure based on the customer’s needs, in most cases our products are components of the customer’s end-user products rather
than independent end-user products.
Certain
illustrative examples of our component parts that have been previously integrated into our clients’ end-user products include:
The
Company’s micro ScoutCam™ 6.5 Lum, pictured above, was integrated into a NASA-commissioned project, and as a result it became
the first micro camera utilized in orbit, and thereafter was successfully operated outside the International Space Station in May 2015
(see: nexis.gsfc.nasa.gov/rrm_phase2vipir.html and youtu.be/O9bmZJATnJs).
Pictured
above is a single-use visualization solution that was developed and sold to A.M. Surgical, which was designed to replace expensive and
bulky reusable endoscopes used in carpal tunnel surgery by their Stratos surgical device. We prepared both wired and wireless versions.
Wireless device was cleared for marketing by the US Food and Drug Administration (FDA) and it is compliant with FCC regulations.
Our
business model includes engaging companies seeking to add a video visualization to their existing or new product(s) or looking into developing
new products that include micro video visualization. Accordingly, our customer base is exclusively comprised of businesses, and therefore
we are entirely removed from marketing, manufacturing, selling and distributing end-user products to consumers. Our engagement with businesses
is ordinarily conducted in two phases. During the first phase, we conduct the research and development that is required in order to specify,
design, develop, and product the designated visualization apparatus, all for an agreed compensation (e.g., a non-recurrent engineering
fee). During the second phase, we manufacture the apparatus and sell it to the customer for an agreed transfer price. In some cases,
upon a customer’s request, we offer complete ‘turn-key’ contracts, in which we are responsible for most or all product
phases, from the specifications phase to the provision of components or products that are complete, packaged and ready for sale. In such
cases, we may conduct the necessary regulatory tests and handle the required regulatory approvals. In addition, we may also be responsible,
as necessary, for, inter alia, packaging, sterilization, labeling and shipment.
Our
customers include technology-based companies and organizations of all sizes, from early stage start-ups to large, well-established, international
corporations. However, we prefer engaging the latter business partnership as larger corporations provide financial stability, large purchased
quantities, recurring revenue, and valid forecasts for extended durations. In addition, we engage customers from various industries,
such as biomedical, aerospace, certain sensitive or classified industries, security and defense, and research.
In
order to locate and secure new customers we employ both active and passive marketing strategies. As part of our active approach, we employ
three business development managers who analyze target industries and assess whether micro visualization components may add value to
companies operating in those industries. Once we have identified a potentially relevant industry, we approach a variety of target companies
and market the benefits of integrating our micro visualization components into their products. As of the current date, we are in the
process of expanding our business development team in order to better and more effectively implement the foregoing marketing strategy.
In addition, in order to assist us in identifying such industries and target companies, we consult with subject matter experts from various
industries.
In
addition to the active marketing strategy described above, we also employ a multitude of available marketing channels in order to increase
the exposure of our services to relevant industries. These marketing channels include advertising, participating in relevant tradeshows
and conferences, web-marketing, which includes a well maintained website, Search Engine Optimization (SEO), social media presence, frequent
distributions of press-releases in target countries, as well as conventional marketing means, including brochures, presentations, etc.
Additionally, we issue industry-specific marketing materials that are tailored to highlight the relevant features of our technology to
a specific target industry.
As
described above, we interact with prospects globally in order to engage in and secure new projects by various business development and
marketing means, specifically by way of active and passive marketing measures in order to gather interest from potential customers. These
efforts may include, but are not limited to, the following:
|
●
|
engaging
third party companies as territorial representatives in key markets;
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|
|
|
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●
|
initiating
business engagements based on leads received through our website or via other methods or means;
|
|
|
|
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●
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conducting
initial R&D together with such prospects in order to evaluate the feasibility of their contemplated projects;
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|
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|
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●
|
maintaining
an updated and detailed website presenting our core competency and proven track record;
|
|
|
|
|
●
|
promoting
our website in different search engines and other digital forums through SEO campaigning as well as other proactive digital marketing
measures;
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|
|
|
|
●
|
employing
certain social media platforms for campaigning and advertising;
|
|
|
|
|
●
|
reconnecting
with our large database, which includes a multitude of past prospects;
|
|
|
|
|
●
|
developing
and refining marketing communications materials, including digital and printed brochures; and
|
|
|
|
|
●
|
participating
in major vision technology exhibitions such as AIA Vision Show (USA) and Vision Show (Germany).
|
In
addition to our business development efforts that are mainly based on currently existing or future customer needs, we aim to identify
new market opportunities. These efforts include systematical analysis of industrial fields as well as medical fields and procedures in
order to identify where miniature visualization solutions might benefit and attract value. To this end, we have contracted business development
executives with expertise in these fields that are using various resources and interviewing potential uses in identifying the most promising
opportunities. When a potential opportunity is identified we protect our rights by establishing the relevant intellectual property safeguards,
develop various prototypes that may be relevant for the specific application and engage the key opinion leaders of that field to validate
the feasibility of our solutions. Given that we are not a B2C company, our business model does not include commercialization of end-user
products; nevertheless, we intend to engage relevant companies to partner with us in order to convert our innovative prototypes into
market-ready products, completing the required regulatory clearances, and commercializing them based on revenue share models.
We
have certain internal procedures in place for when a potential customer is identified, which when triggered helps provide a roadmap for
the ensuing working relationship with that potential customer. Prior to any formal engagement with a potential customer, two of our departments
– business development and R&D – work in parallel and in accordance with their own internal procedures. The goal of this
work is to define an understanding with the customer that will ordinarily incorporate two phases: (a) an R&D phase, during which
the R&D team develops a custom-tailored visualization component that synthesizes our technology and skill with the customer’s
stated requirements, specifications, and business constraints, and which phase generally includes a formal agreement with respect to
the Non-Recurrent Engineering (NRE) fee that is typically payable according to a pre-defined set of milestones; and (b) a production
phase, during which we manufacture and supply the component part for an agreed upon transfer price.
Over
the years, we have implemented a pricing scheme that allows us to separately price services rendered during the previously described
first phase. Pricing of this first phase is typically prepared by the engineering team, which provides an assessment of the anticipated
costs associated with the R&D of the project, which price will depend on a given customer’s specifications and project vision.
Such costs may include, inter alia, engineering labor, any contracts with sub-contractors, tooling, off-the-shelf and newly designed
components, materials, prototypes production, testing, management overhead, and travel costs. Once we have completed our cost estimation
for the R&D phase, we issue our quote with a certain margin to the customer.
In
order to price the transfer price that will be issued in connection with the aforementioned second phase, the expected Bill-Of Material
(BOM) and Cost-Of-Good Sold (COGS) are established and we price it accordingly with a certain margin to the customer. Often times there
are certain modifications to the original project outlined and agreed upon in the R&D phase, which might necessitate an increase
or decrease to the pricing of the overall project. For that reason, we tend to include a certain margin of flexibility in the final target
transfer price. In addition, we usually link the end transfer price with both annual and per-order Minimum Order Quantities (MOQ), in
order to reflect the actual production quantity of the COGS as well as to commercially incentivize the customer to order larger quantities.
Both
the negotiation process and the contract drafting are usually done in collaboration with the customer, such that both sides can verify
throughout the process that the final agreement meets their technological and business expectations. Furthermore, we are keen to maintain
close contact with the customer throughout the two phases of our engagement with the customer, including for example, by way of teleconferences,
virtual and actual meetings, document exchanges, on-site visits, and reporting of any completion of predefined milestones.
Our
Customers
Currently,
we have one major customer that generates most of our forecasted revenue in the near term: a large international bio-med company that
is developing a visualization component for its invasive surgical device. In addition to the foregoing material customer, we are engaged
in initial negotiations with multiple potential customers operating in a variety of sectors, including biomedical, aerospace, aviation,
automotive, energy, military and security, and others. We currently consider the biomedical and aerospace industries to be our core target
industries, and from which we receive the greatest level of interest and demand. We are pursuing these potential engagements with the
goal of securing research and development contracts that may then materialize into multi-year production contracts. We are in various
stages of engagement with a variety of customers in all the above mentioned industries.
In
the biomedical space, for example, we generally seek to partner with medical device and pharmaceutical companies that develop endoscopes
with or without additional functionality. This variation allows the endoscope to be introduced into anatomical parts that were previously
irrelevant within the video-endoscope space either because of the outer diameter and/or price. To this end, we focus on single-use products
that accommodate the global trend to transition from expensive, multi-use products that require thorough a cleaning protocol, but which
cannot be sterilized, to single-use products.
Lastly,
we have recently mobilized efforts to market the possibility of employing the micro ScoutCam™ technology for the purposes of monitoring
bearings and other sensitive mechanical structures in the IAF helicopters and UAVs. Such an application would complement the rising global
market trends associated with Industry 4.0 and Internet of Things (IoT), in which machines are programmed to test themselves and their
production output, which then automatically alerts the processor of any potential problems at the outset of the endeavor.
Competition
There
are currently several companies that offer small cameras, including, but not limited to, Opcom, Fujikura-Picoramedic, Awaiba, Fisba and
Misumi. We, unlike the aforementioned competitors, offer customized solutions, which includes additional components as needed. Other
companies, such as IntraVu, Medit, and SPI Engineering, offer complete small diameter off-the shelf endoscopes/borescopes. We, however,
focus instead on customizing and integrating our solutions into a given customer’s device. Certain companies, such as Enable, Myriad
Fiber Imaging Tech., Inc., and Precision Optics, act as direct competitors, since they offer similar services.
Proprietary
Rights and Technology
As
we develop customized components and/or products per specific customer requirements, our various projects are constantly in different
stages of development, including: planning, early R&D for a proof of concept, R&D for a prototype, final product/component development,
engineering necessary for a production-ready version, and production of initial batches.
Our
intellectual property rights include such patents and patent applications that were transferred by Medigus as part of the Addendum No.
1 to Amended and Restated Asset Transfer Agreement (the “Addendum”), the License Agreement and the Letter Agreement, additional
patent assets developed by ScoutCam and an asset assigned to us from a third party. For additional information about the License Agreement
refer to “—Certain Relationships and Related Party Transactions” below. Under the Addendum, Medigus transferred five
patent families in exchange for a license in connection with the marketing and sale of the Medigus Ultrasonic Surgical Endostapler. Under
the Addendum, and subject to certain limitations as further set forth therein, Medigus transferred to us the patent families 33209, 29651,
34802, 11777 and 24994, some of which is further discussed below.
We
currently own a total of seven (7) patent families, five of which we consider material to our business and operating success, and which
include the following:
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●
|
Patent
Family 29651 (Integrated Endoscope Irrigation): this patent relates to our ability to develop visualization components and endoscopes,
which include irrigation with a smaller outer diameter by saving the space of the tube that is required to lead the fluids in the
conventional manner. This patent has been granted in Canada, Europe (validated in Germany, Spain, France, Great Britain, Italy and
Ireland), Israel, Japan and the United States, and has a pending continuation in part patent application in the United States. The
expiration date for this patent in the United States patent is December 3rd, 2033 and in each of the other aforementioned
jurisdictions, is February 28, 2033;
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|
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●
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Patent
Family 11777 (Multiple View Endoscopes): this patent relates to our ability to develop visualization components and endoscopes, which
include multiple cameras, especially ones that provide side views, and thereby improve the field of view of the visualization components
or endoscopes and provide more information to the user. This patent has been granted and in force in Japan, Mexico, New Zealand and
the United States. The expiration date for this patent in the United States is October 12th, 2021, and in each of the
other aforementioned jurisdictions, is September 6, 2021;
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|
|
|
|
●
|
Patent
Family 24994 (Small Diameter Video Camera Heads and Medical Devices and Visualization Probes Containing Them): this patent relates
to our ability to develop cameras, visualization components, and medical devices with a small diameter, thus enabling the insertion
of the camera into smaller cavities or leaving more space in the device for the use and application of other functions, such as a
working channel. This patent has been granted in Japan, Korea, Israel, the United States and Europe (validated in Germany, France,
Great Britain and Italy) and also has patent assets pending an opposition appeal in Europe. The expiration dates for these patents
in the United States are April 5, 2032 and March 10, 2031, and in each of the other aforementioned jurisdictions, September 16, 2030;
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|
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●
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Patent
Family 33209 (Camera Head): this patent relates to our ability to develop cameras, visualization components, and endoscopes with
a smaller total outer diameter, by reducing the outer diameter of the electronic board on which the sensor is mounted, thus enabling
the insertion of the camera into smaller cavities or leaving more space in the device for the use and application of other functions,
such as a working channel. This patent has been granted in Israel and the United States, and is pending approval in Canada, Europe,
Japan and a continuation in part patent application in the United States. The expiration date for this patent in Israel is June 11,
2035, and in each of the other aforementioned jurisdictions it is June 9, 2036;
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|
●
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Patent
Family 40353 (Medical Ophthalmic Device; Miniature Precision Medical Device) – these pending patent applications relate to
our ability to develop a miniature medical device with a high-resolution visualization capabilities which can be used in microsurgery
or diagnostics such as ophthalmology, neurosurgery, plastic surgery, otorhinolaryngology, Ear-Nose-Throat, and/or other medical fields
in which the penetration is limited due to different reasons including the healing process. This patent family includes a pending
US patent application and a pending Patent Cooperation Treaty (PCT) patent application and their expected expiry dates, if issued,
will be in 2039-2040; and
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|
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|
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●
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AI-Based
and/or Electronic-Controlled Miniature Camera Sensor and Detector System patent family - relates to sensor and detector systems for
the development of very small size and resilient visualization capabilities. Such systems can be used in extreme conditions and/or
in conjunction with diagnostic software/hardware tools to display and analyze changes in critical images that could not have been
displayed or analyzed using existing systems. The patent family includes two U.S. provisional patent applications. If ultimately
issued by the United States Patent and Trademark Office, such patent would be expected to expire in early 2042.
|
Employment
As
of June 23, 2021, we had 32 full-time (or near full-time) employees. This number is expected to grow. We may recruit additional engineers
to the R&D team.
Research
and Development
Our
R&D organization is responsible for the design, development, testing and delivery of new technologies, features and integrations
of our component parts. Research and development employees are located primarily in our principal corporate office on Omer, Israel. As
of June 23, 2021, we had nine employees in our research and development organization. We intend to continue to invest in our research
and development capabilities.
Regulation
Our
approach to regulation is generally determined based on a given project. In our engagements with customers operating in the biomedical
sector, we comply with the medical device standards in that corresponding territory, such as the FDA or International Organization for
Standardization (ISO), among others. Compliance with these regulations is achieved through our QA department and the support we receive
from highly experienced quality assurance and regulatory affairs consultants. In addition, we are being audited annually by MEDCERT GmbH,
a German Notified Body.
For
instance, ISO 13485:2016 is a regulatory benchmark that we comply with while working on our medical device projects. ISO 13845:2016 is
similar to ISO 9001 in terms of its quality management system (QMS) requirements, however, ISO 13485:2016 is generally considered more
rigorous and comprehensive.
Given
that we do not manufacture or distribute end-user products, and instead service businesses pursuant to a B2B model, we are subject to
far fewer regulatory standards commonly associated with medical device manufacturers or distributors. We develop components for other
companies that thereafter develop, manufacture and distribute our components, and therefore our involvement in the production chain demands
comparatively less regulatory compliance. This notwithstanding, we are careful to communicate with the business customer in order to
identify certain regulatory dimensions inherent to the project, to which we should pay additional attention. For example, when a component
of ours is integrated into a business’s end-user product, such as for the purpose of touching human tissue, we develop and manufacture
our parts and components while taking into account certain applicable regulatory standards. These standards might include, inter alia,
relevant FDA regulations (e.g. CFR 21 part 820, the medical device reporting requirements (MDR), among others) as well as ISO regulations
(e.g. ISO 14644-1, specifically in connection with cleanrooms and associated controlled environments, among other items, or ISO 10993,
in connection with the biological evaluation of medical devices). Furthermore, we prioritize our team’s compliance with the Restriction
of Hazardous Substances Directives (RoHS) and REACH (EC 1907/2006).
Similarly,
if a component part of ours is incorporated into an electronic device for the purpose of being used inside a human body, we ensure compliance
with certain FDA requirements as well as IEC 60601 for safety and Electrostatic discharge, including the heating of parts at more than
42 degrees Celsius, as well as a variety of additional technical standards designed for the safety and essential performance of medical
electrical equipment. Moreover, we perform risk management assessments in accordance with EN ISO 14971:2019 and ISO/TR 24971:2013.
In
certain instances, our customers prefer that we conduct the testing of its products in internationally certified labs in order to further
guarantee our component parts satisfy the applicable regulatory standards. In this scenario, we perform the required tests as a service
to the customer and provide the customer with the official test results, specifically in accordance with ISO/IEC 17025:2017, which the
customer can later use in order to apply for the required marketing clearance of its end-user product.
Properties
We
do not own property and currently lease our principal corporate office, which is located at Suites 7A and 3KB, Industrial Park, P.O.
Box 3030, Omer, Israel 8496500. We believe our leased office sufficiently meets our current needs.
MANAGEMENT
Current
Management
The
following table sets forth the names and ages of our directors and executive officers:
Name
|
|
Age
|
|
Position
|
Prof.
Benad Goldwasser†
|
|
70
|
|
Chairman
of the Board
|
Shmuel
Donnerstein†
|
|
68
|
|
Director
|
Ronen
Rosenbloom
|
|
49
|
|
Director
|
Issac
Zilberman
|
|
69
|
|
Director
|
Lior
Amit†
|
|
55
|
|
Director
|
Moshe
(Mori) Arkin
|
|
68
|
|
Director
|
Inbal
Kreiss†
|
|
55
|
|
Director
|
Zeev
Vurembrand†
|
|
70
|
|
Director
|
Yovav
Sameah*
|
|
48
|
|
Chief
Executive Officer
|
Tanya
Yosef*
|
|
38
|
|
Chief
Financial Officer
|
Amir
Govrin*
|
|
54
|
|
Chief
Technology Officer
|
Katrin
Dlugach*
|
|
39
|
|
VP
of Research and Development
|
*
|
Executive
Officer
|
†
|
Independent
Director
|
Directors
Prof.
Benad Goldwasser has served as chairman of our board of directors since December 26, 2019, and has served as chairman of ScoutCam
Ltd.’s board of directors since its inception. Prof. Goldwasser is a serial entrepreneur and retired urology medical doctor. In
2016, Prof. Goldwasser launched a venture capital fund partnered with SAIL, a Shanghai Government investment company. Prof. Goldwasser
has served as a member of the board of directors of Innoventric Ltd. since 2017. From 2013-2016 Prof. Goldwasser served as an external
director of BioCanCell Ltd. (TASE: BICL). Prof. Goldwasser was the co-founder of Vidamed Inc., Medinol Ltd., Rita Medical Inc., Optonol
Ltd. and GI View Ltd. Prof. Goldwasser served as managing director of Biomedical Investments Ltd., an Israeli Venture Capital firm. During
his medical career, he served as Chairman of Urology at the Chaim Sheba Medical Center and Professor of Surgery at Tel-Aviv University.
Prof. Goldwasser holds an MD and MBA from Tel-Aviv University.
Shmuel
Donnerstein has served on our board of directors since December 26, 2019. Mr. Donnerstein is the chairman and owner of the RB Group.
Prior to that, in 1995 Mr. Donnerstein established Open Gallery Door Company, and in 1998 led its merger with Carmiel Timber Plants,
which Mr. Donnerstein had acquired prior to the merger. Mr. Donnerstein managed the combined company until 2006. Earlier in his career,
Mr. Donnerstein was owner and CEO of Motti Sweets from 1975 until it was acquired by the Strauss Group in 1983. In 2014, Mr. Donnerstein
was awarded the Industry Prize from the Manufacturers’ Association of Israel.
Ronen
Rosenbloom has served as a member of our board since December 26, 2019. Mr. Rosenbloom is an independent lawyer working out of a
self-owned law firm specializing in white collar offences. Mr. Rosenbloom serves as chairman of the Israeli Money Laundering Prohibition
committee and the Prohibition of Money Laundering Committee of the Tel Aviv District, both of the Israel Bar Association. Mr. Rosenbloom
previously served as a police prosecutor in the Tel Aviv District. Mr. Rosenbloom holds an LLB from the Ono Academic College, an Israeli
branch of University of Manchester.
Issac
Zilberman has served as a member of our board since December 26, 2019. From 2007 through the end of 2016, Mr. Zilberman also served
as a special investment advisor at Sullam Holdings L.R. Ltd., a financial services corporation in the Lenny Recanati Group, focusing
primarily on investments in high-tech, biotechnology and real estate companies. Mr. Zilberman also serves as a director in other private
Israeli companies, and has over 20 years of prior experience as an executive officer of various public and private companies. Mr. Zilberman
holds a BA in economics and accounting from Tel Aviv University in Tel Aviv, Israel, and he is a certified public accountant in Israel.
Lior
Amit has served on our board of directors since December 26, 2019. Since 2014, Mr. Amit has served as a financial consultant to multiple
companies on matters related to, inter alia, mergers and acquisitions. Mr. Amit currently serves as a member of the board of directors
for multiple Israeli public and private companies, including in the role of an external or independent director. Mr. Amit holds both
a BA in economics and accounting and an MBA from Tel-Aviv University. Mr. Amit is a certified public accountant in Israel.
Moshe (Mori) Arkin has served on our board of directors since February 15, 2021. Mr. Arkin is a leading life science and pharmaceutical
entrepreneur and serves as the chairman of Arkin Holdings Ltd., which he founded in 2009. Mr. Arkin has served as chairman of the board
of directors of Sol Gel Technologies Ltd. (NASDAQ: SLGL) since 2014 and sits on the board of directors of several private pharmaceutical
and medical device companies, including SoniVie Ltd., a company developing systems for the treatment of pulmonary arterial hypertension,
Digma Medical, a company developing systems to treat insulin resistance present in type 2 diabetes and other metabolic syndrome diseases,
and Valcare Medical, a company developing heart valve devices. From 2005 to 2008, Mr. Arkin served as the head of generics at Perrigo
Company, and from 2005 until 2011, as a member of its board of directors. Prior to joining Sol Gel Technologies Ltd., Mr. Arkin served
as a director of cCAM Biotherapeutics Ltd., a company focused on the discovery and development of novel immunotherapies to treat cancer
from 2012 until its acquisition in 2015 by Merck & Co., Inc. Mr. Arkin served as chairman of Agis Industries Ltd. from 1972 until
its acquisition by Perrigo Company in 2005. Mr. Arkin holds a B.A. in psychology from the Tel Aviv University, Israel.
Inbal Kreiss has served on our board of directors since April 9, 2021. Ms. Kreiss is currently the Head of Innovation at the Systems,
Missiles and Space Division of the Israeli Aerospace Industries Ltd. (IAI) and Chairwoman of RAKIA, Israel’s 2nd Scientific and
Technological Mission to the International Space Station. Since 2013, Ms. Kreiss has served as Deputy Director of the Space Division
at IAI, leading the development, construction, launch and operation of observation and communication satellites for both Israeli and
foreign users. Prior to that, Ms. Kreiss held various leadership positions within IAI, including chief engineer of Israel’s Arrow
2 anti-ballistic missile defense system from 2000 to 2006, and project manager of the Arrow 3 exo-atmospheric interceptor from 2007 to
2013. Ms. Kreiss holds a B.Sc in chemical engineering from the Technion, Israeli Institute of Technology, an Executive Masters in Business
Administration from Tel Aviv University, and completed a visiting research fellowship at the Aeronautics & Astronautics Department
of the Massachusetts Institute of Technology (MIT).
Zeev
Vurembrand has served on our board of directors since May 13, 2021. Mr. Vurembrand is currently the Chief Executive Officer and Owner
of Vurembrand Management & Innovation Ltd. and a member of the board of directors of Isras Investment Company Ltd. (TASE: ISRS) since
2016, Bezeq the Israeli Telecommunication Corp. Ltd. (TASE: BEZQ) since 2017 and Lageen Ltd. since 2019. From 2013 until 2019, Mr. Vurembrand
was the Chief Executive Officer of Kupat Holim Meuhedet, Israel’s third largest health care organization. From 2008 until 2013,
he was the Chief Executive Officer of Alon Holding Blue Square – Israel Ltd., and prior to that, from 2007 until 2008, he was the
Chief Executive Officer of Phoenix Investments and Finance Ltd. Earlier in his career, from 2002 until 2007, Mr. Vurembrand was the Chief
Executive Officer of Clalit Health Services Group, Israel’s largest health care organization. Mr. Vurembrand has served on numerous
boards of directors, including Africa Israel Resedence LTD. (TASE: AFRE) from 2014 until 2016, Discount Bank (TASE:DSCT) 2006 until 2007,
U-Bank from 2005 until 2006, Blue Square Israel (TASE: BSI) from 2001 until 2006, and Dikla Medical Insurance Ltd. from 1995 until 2002.
Mr. Vurembrand has also served on the board of trustees of Bar Ilan University since 2019. Mr. Vurembrand holds a B.Sc in industrial
engineering and management from the Technion, Israeli Institute of Technology.
Executive
Officers
Yovav Sameah has served as Chief Executive Officer of the Company since April 15, 2021. Prior to his position with the Company, Mr.
Sameah was the Chief Executive Officer of Frontline PCB Solutions, a non-public worldwide leading provider of Pre-Production and Industry
4.0 SW solutions in the PCB industry, and the subsidiary of KLA-Tencor Corp. (Nasdaq: KLAC). From September 2013 until July of 2015,
Mr. Sameah was the Corporate Vice President and Chief Products Officer at Orbotech Ltd. (acquired by KLA-Tencor in February of 2019).
Prior to that, Mr. Sameah held a variety of roles at Orbotech, including Vice President of Electronic Components Manufacturers Business
(PCB Division) from September 2012 until September 2013, and Vice President AOI & Repair Product Line (PCB Division) from March 2008
until March 2012. Mr. Sameah holds both a BSc in chemical engineering and an MBA from Ben-Gurion University, Israel.
Tanya
Yosef has served as our Chief Financial Officer since December 27, 2019. Ms. Yosef is a certified public accountant with many years
of experience, and held various positions with Medigus Ltd. (Nasdaq: MDGS) since December of 2009, including most recently as chief financial
officer and prior thereto as financial controller. During 2008-2009 Ms. Yosef worked in the audit department at Kesselman & Kesselman,
a member firm of PricewaterhouseCoopers International Limited. Ms. Yosef holds a BA in Economics and Accounting from the Ben-Gurion University,
Israel.
Amir Govrin has served as our Chief Technology Officer since May 1, 2019. Prior to his position with ScoutCam, Mr. Govrin held various
positions at Medigus Ltd. (Nasdaq: MDGS) beginning in 2003, including VP R&D, R&D manager and GERD project manager. Prior to
his tenure at Medigus, Mr. Govrin was project manager at Aran R&D from 1997 until 2003, and an R&D engineer at Netafim Ltd. from
1992 until 1997. Mr. Govrin holds a B.Sc in mechanical engineering from Tel Aviv University, Israel.
Katrin Dlugach has served as our VP of Research and Development since July 1, 2019. Prior to her position with ScoutCam, Ms. Dlugach
was a system engineer and project manager at Nanofabrica Ltd. from August 2018 to June 2019. Before that, Ms. Dlugach served in a number
of roles, including chief of development and chief executive officer, at Nitinotes Ltd. from 2014 until 2018. Earlier in her career,
Ms. Dlugach held a variety of R&D positions at Medigus Ltd. (Nasdaq: MDGS). Ms. Dlugach holds a B.Sc., M.Sc. and MBA from Ben-Gurion
University, Israel.
Composition
of the Board of Directors
Subject
to the approval of our stockholders, our board of directors will
be divided into three classes. Ronen Rosenbloom, Issac Silberman and Zeev Vurembrand are our Class I directors, with their terms
of office to expire at our 2022 annual meeting of stockholders. Lior Amit, Shmuel Donnerstein and Inbal Kreiss are our Class II directors,
with their terms of office to expire at our 2023 annual meeting of stockholders. Professor Benad Goldwasser and Moshe (Mori) Arkin are
our Class III directors, with their terms of office to expire at our 2024 annual meeting of stockholders. At each annual meeting of stockholders,
directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly
elected and qualified.
Our
officers hold office until the earlier of their death, resignation or removal by our board of directors or until their successors have
been selected. They serve at the pleasure of our board of directors.
Director
Independence
Our
board of directors has determined that Professor Benad Goldwasser, Mr. Shmuel Donnerstein, Ms. Inbal Kreiss, Mr. Lior Amit and Mr. Zeev
Vurembrand do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director and that each of these directors is “independent” as that term is defined under the rules of The Nasdaq Stock
Market LLC (the “Nasdaq Rules”).
Board
Leadership Structure and Role in Risk Oversight
Our
board of directors is primarily responsible for overseeing our risk management processes on behalf of the Company. The board of directors
intends going forward to receive and review periodic reports from management, auditors, legal counsel, and others, as considered appropriate
regarding our assessment of risks. The board of directors intends to focus on the most significant risks facing the Company and our general
risk management strategy, and also will attempt to ensure that risks undertaken by the Company are consistent with our board of directors’
appetite for risk. While the board of directors oversees our risk management, management is responsible for day-to-day risk management
processes.
Board
Committees
Our
board of directors directs the management of our business and affairs, as provided by Nevada law, and conducts its business through meetings
of the board of directors and standing committees. We will have a standing audit committee and compensation committee upon the consummation
of this offering. In addition, from time to time, special committees may be established under the direction of the board of directors
when necessary to address specific issues.
Audit
Committee
Our
audit committee will be responsible for, among other things:
|
●
|
appointing,
compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm;
|
|
|
|
|
●
|
discussing
with our independent registered public accounting firm their independence from management;
|
|
|
|
|
●
|
reviewing
with our independent registered public accounting firm the scope and results of their audit;
|
|
|
|
|
●
|
approving
all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
|
|
|
|
|
●
|
overseeing
the financial reporting process and discussing with management and our independent registered public accounting firm the quarterly
and annual consolidated financial statements that we file with the SEC;
|
|
|
|
|
●
|
overseeing
our financial and accounting controls and compliance with legal and regulatory requirements;
|
|
●
|
reviewing
our policies on risk assessment and risk management;
|
|
|
|
|
●
|
reviewing
related person transactions; and
|
|
|
|
|
●
|
establishing
procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing
matters.
|
Upon
the consummation of this offering, our audit committee will consist of Shmuel Donnerstein, Zeev Vurembrand and Inbal Kreiss, with Zeev
Vurembrand serving as chair. Rule 10A-3 of the Exchange Act and Nasdaq Rules require that our audit committee have at least one independent
member upon the listing of our Common Stock, have a majority of independent members within 90 days of the date of this prospectus and
be composed entirely of independent members within one year of the date of this prospectus. Our board of directors has affirmatively
determined that Shmuel Donnerstein, Zeev Vurembrand and Inbal Kreiss each meet the definition of “independent director” for
purposes of serving on the audit committee under Rule 10A-3 under the Exchange Act and Nasdaq Rules. Each member of our audit committee
also meets the financial literacy requirements of Nasdaq listing standards. In addition, our board of directors has determined that Zeev
Vurembrand will qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation
S-K. Our board of directors will adopt a written charter for the audit committee, which will be available on our principal corporate
website at www.scoutcam.com, substantially concurrently with the consummation of this offering. The information on any of our
websites is deemed not to be incorporated in this prospectus or to be part of this prospectus.
Compensation
Committee
Our
compensation committee will be responsible for, among other things:
|
●
|
reviewing
and approving the compensation of our chief executive officer and other executive officers;
|
|
|
|
|
●
|
reviewing
and making recommendations to the board of directors regarding director compensation; and
|
|
|
|
|
●
|
appointing
and overseeing any compensation consultants.
|
Upon
the consummation of this offering, our compensation committee will consist of Lior Amit, Inbal Kreiss and Zeev Vurembrand, with Inbal
Kreiss serving as chair. Our board has determined that Lior Amit, Inbal Kreiss and Zeev Vurembrand meet the definition of “independent
director” for purposes of serving on the compensation committee under Nasdaq Rules, including the heightened independence standards
for members of a compensation committee, and are “non-employee directors” as defined in Rule 16b-3 of the Exchange Act. Our
board of directors will adopt a written charter for the compensation committee, which will be available on our principal corporate website
at www.scoutcam.com, substantially concurrently with the consummation of this offering. The information on any of our websites
is deemed not to be incorporated in this prospectus or to be part of this prospectus.
Director
Nominations
We
will not have a standing nominating committee. In accordance with Rule 5605(e)(2) of the Nasdaq Rules, a majority of the independent
directors may recommend a director nominee for selection by the board of directors. Our board of directors believes that the independent
directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation
of a standing nominating committee. As we do not have a standing nominating committee, we will not have a nominating committee charter
in place.
Our
board of directors will consider candidates for nomination who have a high level of personal and professional integrity, strong ethics
and values and the ability to make mature business judgments. In general, in identifying and evaluating nominees for director, our board
of directors will also consider experience in corporate management such as serving as an officer or former officer of a publicly held
company, experience as a board member of another publicly held company, professional and academic experience relevant to our business,
leadership skills, experience in finance and accounting or executive compensation practices, whether candidate has the time required
for preparation, participation and attendance at Board meetings and committee meetings, if applicable, independence and the ability to
represent the best interests of our stockholders.
Compensation
Committee Interlocks and Insider Participation
None
of the members of our compensation committee is or has been an officer or employee of the Company. None of our executive officers serves
as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that
has one or more of its executive officers serving on our board of directors or compensation committee.
Code
of Business Conduct and Ethics
Prior
to the completion of this offering, we will adopt a written code of business conduct and ethics that applies to our directors, officers
and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or
persons performing similar functions. A copy of the code will be posted on our website, www.scoutcam.com. In addition, we intend to post
on our website all disclosures that are required by law or Nasdaq listing standards concerning any amendments to, or waivers from, any
provision of the code. The information on any of our websites is deemed not to be incorporated in this prospectus or to be part of this
prospectus.
Director
Relationships
There
are no family relationships between or among any of our directors or executive officers.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets out the compensation paid, for the year ended December 31, 2020, to the following Named Executive Officers:
●
|
Dr.
Yaron Silberman, the former Chief Executive Officer of ScoutCam Inc. and the former Chief Executive Officer of our wholly-owned subsidiary,
ScoutCam Ltd.;
|
|
|
●
|
Amir
Govrin, the Chief Technology Officer of ScoutCam Inc. and of our wholly-owned subsidiary, ScoutCam Ltd.; and
|
|
|
●
|
Katrin
Dlugach, VP R&D of ScoutCam Inc. and of our wholly-owned subsidiary, ScoutCam Ltd.
|
Name and
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Option
Awards (*)
|
|
|
All
Other Compensation
|
|
|
Total
|
|
|
|
$
in thousands
|
|
Dr.
Yaron Silberman,
Former
Chief Executive Officer(1)
|
|
|
2020
|
|
|
$
|
198
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
167
|
|
|
$
|
20
|
|
|
$
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amir
Govrin,
Chief
Technology Officer (2)
|
|
|
2020
|
|
|
$
|
168
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
111
|
|
|
$
|
21
|
|
|
$
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Katrin Dlugach, VP R&D
of ScoutCam Ltd. (3)
|
|
|
2020
|
|
|
$
|
156
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
51
|
|
|
$
|
-
|
|
|
$
|
207
|
|
(1)
|
Consists
of Dr. Silberman’s compensation earned in his capacity as the Chief Executive Officer of wholly-owned subsidiary, ScoutCam
Ltd. Dr. Silberman did not earn any compensation in his capacity as the Chief Executive Officer of ScoutCam Inc.
|
|
|
(2)
|
Consists
of Mr. Govrin’s compensation earned in his capacity as the Chief Technology Officer of our wholly-owned subsidiary, ScoutCam
Ltd. Mr. Govrin did not earn any compensation in his capacity as the Chief Technology Officer of ScoutCam Inc.
|
|
|
(3)
|
Consists
of Ms. Katrin Dlugach compensation earned in his capacity as the Chief Technology Officer of our wholly-owned subsidiary, ScoutCam
Ltd. Ms. Dlugach did not earn any compensation in her capacity as the VP R&D of ScoutCam Inc.
|
|
|
(*)
|
Represents
the equity-based compensation expenses recorded in the Company’s consolidated financial statements for the year ended December
31, 2020, based on the option’s fair value, calculated in accordance with accounting guidance for equity-based compensation.
|
Employment
Agreements
We,
and through our Israeli subsidiary, have entered into written employment agreements with each of our executive officers. All of these
agreements contain customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. However,
the enforceability of the noncompetition provisions may be limited under applicable law. In addition, we have entered into agreements
with each executive officer and director pursuant to which we have agreed to indemnify each of them to the fullest extent permitted by
law to the extent that these liabilities are not covered by directors and officers insurance.
Outstanding
Equity Awards
The
following table provides information concerning unexercised options for each of our named executive officers, as that term is defined
in Item 402(m)(2) of Regulation S-K as of our fiscal year end of December 31, 2020.
Name
and Position
|
|
No.
of Securities Underlying Unexercised Options (#) Exercisable
|
|
|
No.
of Securities Underlying Unexercised Options (#) Unexercisable
|
|
|
Option
Exercise
Price ($)
|
|
|
Vesting
Schedule
|
|
Option
Expiration
Date
|
Dr.
Yaron Silberman,
|
|
|
291,460
|
|
|
|
374,735
|
|
|
|
0.29
|
|
|
(*)
|
|
February
12, 2027
|
Former
Chief Executive Officer (***)
|
|
|
-
|
|
|
|
314,081
|
|
|
|
0.29
|
|
|
(**)
|
|
June
22, 2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms.
Tanya Yosef, Chief Financial Officer
|
|
|
116,584
|
|
|
|
149,894
|
|
|
|
0.29
|
|
|
(*)
|
|
February
12, 2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Amir Govrin, Chief Technology Officer
|
|
|
233,168
|
|
|
|
299,788
|
|
|
|
0.29
|
|
|
(*)
|
|
February
12, 2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms.
Katrin Dlugach, VP R&D
|
|
|
83,274
|
|
|
|
183,204
|
|
|
|
0.29
|
|
|
(*)
|
|
February
12, 2027
|
(*)
25% of the options granted will vest on the first anniversary, and 6.25% of the options will vest at the end of each subsequent three-month
period thereafter over the course of the following three (3) years; and (iii) an acceleration mechanism pursuant to which any outstanding
and unvested option shall immediately accelerate and vest upon the occurrence of certain events, including, inter alia, a merger or sale
of all assets of the Company.
(**)
33.33% of the options granted will vest on the first, and 8.33% of the options will vest at the end of each subsequent three-month period
thereafter over the course of the following two (2) years; and (iii) an acceleration mechanism pursuant to which any outstanding and
unvested option shall immediately accelerate and vest upon the occurrence of certain events, including, inter alia, a merger or sale
of all assets of the Company.
(***)
As a result of the termination of Dr. Silberman’s employment with the Company on March 31, 2021, 647,179 options to purchase our
common stock previously granted to Dr. Silberman terminated concurrently therewith.
Retirement
or Similar Benefit Plans
We
do not have any arrangements or plans that provide for the payment of retirement or similar benefits to our directors or executive officers.
Resignation,
Retirement, Other Termination, or Change in Control Arrangements
We
have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or executive
officers at, following, or in connection with the resignation, retirement or other termination of our directors or executive officers,
or a change in control of our Company or a change in our directors’ or executive officers’ responsibilities following a change
in control.
Director
Compensation
The
following table sets out the compensation paid to directors for services rendered during the year ended December 31, 2020.
Name
|
|
Fees
Earned or
Paid in Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards (*)
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
|
|
$
in thousands
|
|
Prof. Benad Goldwasser(1)(2)
|
|
$
|
110
|
|
|
$
|
-
|
|
|
$
|
541
|
|
|
$
|
-
|
|
|
$
|
651
|
|
Shmuel Donnerstein(3)
|
|
$
|
15
|
|
|
$
|
-
|
|
|
$
|
49
|
|
|
$
|
-
|
|
|
$
|
64
|
|
Ronen Rosenbloom(3)
|
|
$
|
15
|
|
|
$
|
-
|
|
|
$
|
20
|
|
|
$
|
-
|
|
|
$
|
35
|
|
Issac Zilberman(3)
|
|
$
|
15
|
|
|
$
|
-
|
|
|
$
|
20
|
|
|
$
|
-
|
|
|
$
|
35
|
|
Lior Amit(3)
|
|
$
|
15
|
|
|
$
|
-
|
|
|
$
|
27
|
|
|
$
|
-
|
|
|
$
|
42
|
|
Irit Yaniv(4) (5)
|
|
$
|
10
|
|
|
$
|
-
|
|
|
$
|
13
|
|
|
$
|
-
|
|
|
$
|
23
|
|
(1)
|
Appointed
as a director of ScoutCam Inc. on December 26, 2019, and served as Chairman of the Board of Directors of our wholly-owned subsidiary,
ScoutCam Ltd., since its inception.
|
|
|
(2)
|
On
July 31, 2019, ScoutCam Ltd. and Prof. Benad Goldwasser entered into a consulting agreement, whereby Prof. Goldwasser agreed to serve
as chairman of the board of directors of ScoutCam Ltd., effective retroactively to March 1, 2019, in consideration that included
a monthly fee of $10,000 and options that represented 5% of our fully-diluted share capital.
|
|
|
(3)
|
Appointed
as a director of ScoutCam Inc. on December 26, 2019.
|
|
|
(4)
|
Appointed
as a director of ScoutCam Inc. on May 18, 2020.
|
|
|
(5)
|
On
February 14, 2021, Dr. Irit Yaniv tendered her resignation as a member of the Board of Directors and our wholly-owned subsidiary,
ScoutCam Ltd. On February 15, 2021, the Board of Directors appointed Mr. Moshe (Mori) Arkin
to serve as a member of the Board of Directors and to fill the vacancy immediately following the resignation of Dr. Irit Yaniv.
|
|
|
(*)
|
Represents
the equity-based compensation expenses recorded in the Company’s consolidated financial statements for the year ended December
31, 2020, based on the option’s fair value, calculated in accordance with accounting guidance for equity-based compensation.
|
Equity
Compensation Plan Information
2020
Share Incentive Plan
We
have adopted the 2020 Plan under which we may grant equity-based incentive awards to attract, motivate and retain the talent for which
we compete.
Authorized
Shares. The maximum number of ordinary shares available for issuance under the 2020 Plan is equal to the sum of 16,422,440 shares,
or such number as our board of directors may determine from time to time.
Administration.
Our board of directors, or a duly authorized committee of our board of directors, will administer the 2020 Plan. Under the 2020 Plan,
the administrator has the authority, subject to applicable law, to interpret the terms of the 2020 Plan and any award agreements or awards
granted thereunder, designate recipients of awards, determine and amend the terms of awards, including the exercise price of an option
award, the fair market value of an ordinary share, the time and vesting schedule applicable to an award or the method of payment for
an award, accelerate or amend the vesting schedule applicable to an award, prescribe the forms of agreement for use under the 2020 Plan
and take all other actions and make all other determinations necessary for the administration of the 2020 Plan.
The
administrator also has the authority to amend and rescind rules and regulations relating to the 2020 Plan or terminate the 2020 Plan
at any time before the date of expiration of its ten year term.
Eligibility.
The 2020 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section 102
of the Israeli Income Tax Ordinance (New Version), 5721-1961 (the “Ordinance”), and Section 3(i) of the Ordinance and for
awards granted to our United States employees or service providers, including those who are deemed to be residents of the United States
for tax purposes, Section 422 of the Code and Section 409A of the Code.
Section
102 of the Ordinance allows employees, directors and officers who are not controlling shareholders and are considered Israeli residents
to receive favorable tax treatment for compensation in the form of shares or options. Our non-employee service providers and controlling
shareholders may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits.
Grant.
All awards granted pursuant to the 2020 Plan will be evidenced by an award agreement, in a form approved, from time to time, by the
administrator in its sole discretion. The award agreement will set forth the terms and conditions of the award, including the type of
award, number of shares subject to such award, vesting schedule and conditions (including performance goals or measures) and the exercise
price, if applicable. Certain awards under the 2020 Plan may constitute or provide for a deferral of compensation, subject to Section
409A of the Code, which may impose additional requirements on the terms and conditions of such awards.
Each
award will expire seven years from the date of the grant thereof, unless such shorter term of expiration is otherwise designated by the
administrator.
Awards.
The 2020 Plan provides for the grant of stock options (including incentive stock options and nonqualified stock options), shares
of common stock, restricted shares, restricted share units and other share-based awards.
Options
granted under the 2020 Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning
of Section 422 of the Code, or may be non-qualified stock options. The exercise price of a stock option may not be less than 100% of
the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant stockholders).
Exercise.
An award under the 2020 Plan may be exercised by providing the company with a written or electronic notice of exercise and full payment
of the exercise price for such shares underlying the award, if applicable, in such form and method as may be determined by the administrator
and permitted by applicable law. An award may not be exercised for a fraction of a share. With regard to tax withholding, exercise price
and purchase price obligations arising in connection with awards under the 2020 Plan, the administrator may, in its discretion, accept
cash, provide for net withholding of shares in a cashless exercise mechanism or direct a securities broker to sell shares and deliver
all or a part of the proceeds to the Company or the trustee.
Transferability.
Other than by will, the laws of descent and distribution or as otherwise provided under the 2020 Plan, neither the options nor any
right in connection with such options are assignable or transferable.
Termination
of Employment. In the event of termination of a grantee’s employment or service with the company or any of its affiliates,
all vested and exercisable awards held by such grantee as of the date of termination may be exercised within three months after such
date of termination, unless otherwise determined by the administrator. After such three month period, all such unexercised awards will
terminate and the shares covered by such awards shall again be available for issuance under the 2020 Plan.
In
the event of termination of a grantee’s employment or service with the company or any of its affiliates due to such grantee’s
death, permanent disability or retirement, all vested and exercisable awards held by such grantee as of the date of termination may be
exercised by the grantee or the grantee’s legal guardian, estate, or by a person who acquired the right to exercise the award by
bequest or inheritance, as applicable, within twelve months after such date of termination, unless otherwise provided by the administrator.
Any awards which are unvested as of the date of such termination or which are vested but not then exercised within the twelve month period
following such date, will terminate and the shares covered by such awards shall again be available for issuance under the 2020 Plan.
Notwithstanding
any of the foregoing, if a grantee’s employment or services with the company or any of its affiliates is terminated for “cause”
(as defined in the 2020 Plan), all outstanding awards held by such grantee (whether vested or unvested) will terminate on the date of
such termination and the shares covered by such awards shall again be available for issuance under the 2020 Plan.
Transactions.
In the event of a share split, reverse share split, share dividend, recapitalization, combination or reclassification of our shares,
or any other increase or decrease in the number of issued shares effected without receipt of consideration by the company (but not including
the conversion of any convertible securities of the company), the administrator in its sole discretion shall make an appropriate adjustment
in the number of shares related to each outstanding award and to the number of shares reserved for issuance under the 2020 Plan, to the
class and kind of shares subject to the 2020 Plan, as well as the exercise price per share of each outstanding award, as applicable,
the terms and conditions concerning vesting and exercisability and the term and duration of outstanding awards, or any other terms that
the administrator adjusts in its discretion, or the type or class of security, asset or right underlying the award (which need not be
only that of the Company, and may be that of the surviving corporation or any affiliate thereof or such other entity party to any of
the above transactions); provided that any fractional shares resulting from such adjustment shall be rounded down to the nearest whole
share unless otherwise determined by the administrator. In the event of a distribution of a cash dividend to all shareholders, the administrator
may determine, without the consent of any holder of an award, that the exercise price of an outstanding and unexercised award shall be
reduced by an amount equal to the per share gross dividend amount distributed by the Company, subject to applicable law.
In
the event of a merger or consolidation of our company, or a sale of all, or substantially all, of the Company’s shares or assets
or other transaction having a similar effect on the Company, or change in the composition of the board of directors, or liquidation or
dissolution, or such other transaction or circumstances that the board of directors determines to be a relevant transaction, then without
the consent of the grantee, the administrator may but is not required to (i) cause any outstanding award to be assumed or substituted
by such successor corporation, or (ii) regardless of whether or not the successor corporation assumes or substitutes the award (a) provide
the grantee with the option to exercise the award as to all or part of the shares, and may provide for an acceleration of vesting of
unvested awards, or (b) cancel the award and pay in cash, shares of the company, the acquirer or other corporation which is a party to
such transaction or other property as determined by the administrator as fair in the circumstances. Notwithstanding the foregoing, the
administrator may upon such event amend, modify or terminate the terms of any award as it shall deem, in good faith, appropriate.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related
Party Transactions
On
June 3, 2019, Medigus made a $720,000 capital contribution to ScoutCam Ltd.
On
July 31, 2019, ScoutCam Ltd. and Prof. Benad Goldwasser entered into a consulting agreement, whereby Prof. Goldwasser agreed to serve
as chairman of the board of directors of ScoutCam Ltd., effective retroactively to March 1, 2019, in consideration of a monthly fee of
$10,000 and options representing 5% of our fully-diluted share capital as of the closing date of the Exchange Agreement (defined below).
On
August 27, 2019, Medigus provided ScoutCam Ltd. with a line of credit in the aggregate amount of $500,000 bearing interest of 4%. The
repayment of the credit line amount was to be spread over one year in monthly payments beginning on the closing date of the Exchange
Agreement (defined below). As of December 31, 2019, we drew down the entire amount of the line of credit.
On
September 3, 2019, an Asset Transfer Agreement by and between ScoutCam Ltd. and Medigus dated May 28, 2019 became effective, whereby
ScoutCam Ltd. transferred $168,000 of assets to Medigus. Under the terms of the Amended and Restated Asset Transfer Agreement, Medigus
transferred certain intellectual property rights and licenses, collectively representing an aggregate of $9.8 million.
On
December 1, 2019, Medigus and ScoutCam Ltd. entered into that Amended and Restated Asset Transfer Agreement, which transferred and assigned
certain assets and intellectual property rights related to its miniaturized imaging business. Under the Amended and Restated Asset Transfer
Agreement, Medigus transferred two patent families to ScoutCam Ltd. in exchange for a perpetual, transferable, worldwide, royalty free,
sub licensable license, to access and use the transferred patent families in connection with the development, marketing and sale of the
Medigus Ultrasonic Surgical Endostapler. In addition, Medigus granted ScoutCam Ltd. a non-exclusive license to access, use, improve,
develop, market and sell licensed intellectual property, including the right to any future versions, enhancements, improvements and derivative
works of such licensed intellectual property in connection with the development and commercialization of the ScoutCam miniature video
technology.
As
a condition of the aforementioned license, Medigus is prohibited from selling, offering to sell or grant any ownership right in the licensed
intellectual property to any potential direct competitor of ScoutCam Ltd. In addition, ScoutCam Ltd. is obligated to provide Medigus
with consultancy and support services for no consideration, on matters relating to the management, development, maintenance and commercialization
of Medigus’ patent portfolio. The Amended and Restated Asset Transfer Agreement is for an indefinite term and it was contractually
permissible to terminate the agreement pursuant to the mutual written consent of the parties prior to closing.
Also
on December 1, 2019, ScoutCam Ltd. and Medigus entered into that certain License Agreement granting ScoutCam Ltd. a perpetual, non-exclusive,
transferable solely upon an M&A Event (as defined therein), royalty free, license to access, use, improve, develop either by or on
behalf of ScoutCam Ltd., market and sell the licensed patent family, including the right to any future versions, enhancements, improvements
and derivative works of the licensed intellectual property for the purpose of developing and commercializing the ScoutCam miniature video
technology. As a condition to the agreement, Medigus is prohibited from selling, offering to sell or grant any ownership right in the
licensed intellectual property to any potential direct competitor of ScoutCam Ltd.
The
patent family licensed under the License Agreement includes know-how which was funded through benefits and incentives provided by the
IIA. As a result of such funding, the patent family is subject to certain restrictions and obligations pursuant to the Innovation Law.
The restrictions applicable to patent family licensed pursuant to the License Agreement require approval of the IIA prior to manufacturing
products resulting from IIA funded know-how outside of Israel, prior to the transfer of IIA funded know-how out of Israel and prior to
a grant of the license out of Israel in connection with the IIA funded know-how. In addition, ScoutCam Ltd. is obligated to notify the
IIA of any change of control and of any non-Israeli entity which becomes an “Interested Party” as defined in the Israeli
Companies Law, 5759-1999, as amended. An Interested Party includes a shareholder holding 5% or more of a company’s issued and outstanding
share capital, an entity entitled to appoint a director or the chief executive officer of a company as well as the directors and chief
executive officer of a company.
On
December 10, 2019, ScoutCam Ltd. and Shrem Zilberman Group Ltd. (the “Consultant”) entered into a consulting agreement whereby
in exchange for certain consulting services, the Consultant received, among other things, an aggregate flat fee of $165,000 and an amount
representing 3% of any exercise price related to those warrants issued as part of the Purchase Agreement (as defined below). Additionally,
in the event the total proceeds received as a result of exercise of warrants issued in connection with the Purchase Agreement exceeded
$2 million at the time of their expiration, the Consultant was required to invest $250,000 in our company.
On
December 30, 2019, we (f/k/a Intellisense Solutions Inc.) and Medigus consummated an exchange agreement (the “Exchange Agreement”),
pursuant to which Medigus assigned, transferred and delivered to us 100% of its holdings in its wholly-owned subsidiary, ScoutCam Ltd.,
in exchange for 60% of our Common Stock. In addition, the Exchange Agreement provided that if ScoutCam Ltd. achieves $33,000,000 in sales
in the aggregate within the first three (3) years immediately subsequent to the closing of the Exchange Agreement, we will issue to Medigus
additional shares of Common Stock representing 10% of our issued and outstanding share capital as of December 30, 2019.
Also
on December 30, 2019, we, ScoutCam Ltd. and certain investors entered into a securities purchase agreement (the “Purchase Agreement”),
whereby in exchange for an aggregate purchase price of approximately US$3.3 million, the foregoing investors received (i) 6,826,623 shares
of Common Stock, (ii) 3,413,312 warrants to purchase one share of Common Stock with an exercise price representing a pre-money valuation
of our company of $16,000,000 for a period of twelve (12) months, and (iii) 6,826,623 warrants to purchase one share of Common Stock
with an exercise price representing a pre-money valuation of our company of $24,000,000 for a period of eighteen (18) months.
On
March 15, 2020, our board of directors approved, among other things, a quarterly fee of $4,000 payable to each of our currently serving
directors, excluding Professor Benad Goldwasser. On April, 9, 2021, our board of directors approved the same terms for directors appointed
subsequent to March 15, 2020.
On
April 20, 2020, Medigus and ScoutCam Ltd. entered into that certain Intercompany Services Agreement, which amended and restated the intercompany
services agreement executed between the parties on May 30, 2019. The agreement has an initial term of one year, and renews automatically
for additional one-year periods, unless either party provides 60 (sixty) days written notice of non renewal. Either Medigus or ScoutCam
Ltd. may terminate the agreement for convenience upon providing 60 (sixty) days prior written notice. The services to be provided by
ScoutCam Ltd. include, inter alia, the provision of office space, utilities, car services, insurance and chief financial officer services.
In consideration for the foregoing services, ScoutCam Ltd. is entitled to arm’s length service fees based on the most recent transfer
pricing analysis as performed by an external expert, which may be adjusted from time to time.
On
May 18, 2020, we entered into and consummated a securities purchase agreement with M. Arkin (1999) Ltd. (“Arkin Ltd.”) in
connection with the sale and issuance of 2,066,116 units (“Arkin Units”), at a purchase price of $0.968 per Arkin Unit, and
for an aggregate purchase price of $2,000,000 (the “Arkin Transaction”). Each Arkin Unit consists of: (i) two shares of Common
Stock and (ii) (a) one warrant to purchase one share of Common Stock with an exercise price of $0.595 (“Arkin Warrant A”)
and (b) two warrants, each to purchase one share of Common Stock with an exercise price of $0.893 (“Arkin Warrant B”, and
together with Arkin Warrant A, the “Arkin Warrants”). The shares of Common Stock and Arkin Warrants were issued to Arkin
Ltd. pursuant to Regulation S of the Securities Act of 1933, as amended.
Also
May 18, 2020, and in connection with the Arkin Transaction, we, Medigus and Arkin Ltd. entered into a Voting Agreement, pursuant to which
Arkin Ltd. and Medigus each agreed to vote their respective shares of Common Stock in favor of the election of the opposite party’s
designated representative(s), as applicable, to our board of directors. Each of Arkin Ltd.’s and Medigus’ rights under the
Voting Agreement are contingent upon, inter alia, such party maintaining a certain beneficial ownership threshold in our company.
Also
on May 18, 2020, in connection with the Arkin Transaction, we, Medigus and Arkin, entered into the Letter Agreement, whereby, provided
that we obtain certain regulatory approvals described therein, we and Medigus agreed to amend certain terms of the Amended and Restated
Asset Transfer Agreement and the License Agreement, thereby transferring outright certain patent assets from Medigus to us; provided,
however, that in the event that we neglects the foregoing patent assets, we must transfer back ownership of the patent assets to Medigus
for no additional consideration and absent any additional contingencies.
On
June 23, 2020, we and Medigus entered into a Conversion Side Letter, pursuant to which Medigus converted $381,136 worth of outstanding
credit previously extended to us, including interest by Medigus, into (a) 787,471 shares of our Common Stock, (b) warrants to purchase
393,736 shares of Common Stock at an exercise price of $0.595, and (c) warrants to purchase 787,471 shares of our Common Stock at an
exercise price of $0.893.
In
November 2020, we and certain of our warrant holders, including Professor Benad Goldwasser and Arkin Ltd., executed an amendment in connection
with previously issued warrants to purchase shares of Common Stock, pursuant to which the parties agreed to remove the restrictions on
transferability originally imposed on such warrants. As of December 31, 2020, warrants to purchase 902,271 shares of Common Stock were
transferred in accordance with the foregoing amendment.
During
2020, our board of directors authorized the allotment of options to purchase 2,863,854 shares of Common Stock to Prof. Benad Goldwasser
and an aggregate of 3,625,318 options to purchase shares of Common Stock to additional directors and certain officers of our company.
See also note 9 to our financial statements for year ended December 31, 2020.
On
March 29, 2021, we issued to certain investors, including M. Arkin (1999) Ltd., a major stockholder of our company, of which Mori Arkin,
a director of our company, is the owner, 22,222,223 units in exchange for an aggregate purchase price of $20 million. Each such unit
consists of (i) one share of Common Stock and (ii) one warrant to purchase one share of Common Stock with an exercise price of $1.15
per share. Each such warrant is exercisable until the close of business on March 31, 2026.
Pursuant to the terms of the foregoing warrants, following April 1, 2024, if the closing price of the Common Stock equal or exceeds 135%
of the aforementioned exercise price (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other
similar transactions after the issue date of the warrants) for any thirty (30) consecutive trading days, we may force the exercise of
the warrants, in whole or in part, by delivering to these investors a notice of forced exercise. The shares of Common Stock and the warrants
were issued to such investors pursuant to Regulation S of the Securities Act of 1933, as amended. The securities issued in connection
with the foregoing investment were registered by us for resale under a registration statement on Form S-1 declared effective on May 10,
2021.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT1
Security
Ownership of Certain Beneficial Owners and Management
The
table below provides information regarding the beneficial ownership of our Common Stock as of June 23, 2021, of (i) each of our current
directors, (ii) each of the Named Executive Officers, (iii) all of our current directors and officers as a group, and (iv) each person
or entity known to us who owns more than 5% of our Common Stock.
The
percentage of Common Stock beneficially owned is based on 61,342,216 shares of Common Stock outstanding as of June 23, 2021. The number
and percentage of shares beneficially owned by a person or entity also include shares of Common Stock issuable upon exercise of warrants
that are currently exercisable or will become exercisable within 60 days of June 23, 2021. However, these shares are not deemed to be
outstanding for the purpose of computing the percentage of shares beneficially owned of any other person or entity.
Unless
otherwise indicated below, the address for each beneficial owner listed in the table below is c/o ScoutCam Inc., Suite 7A, Industrial
Park, P.O. Box 3030, Omer, Israel 8496500.
Name and
Address of Beneficial Owner
|
|
Title of
Class
|
|
Amount
and Nature
of Beneficial
Ownership(1)
|
|
|
Percent
of Class
|
|
Prof. Benad Goldwasser(2)
|
|
Common Stock
|
|
|
2,301,725
|
|
|
|
3.64
|
%
|
Shmuel Donnerstein(3)
|
|
Common Stock
|
|
|
1,198,806
|
|
|
|
1.94
|
%
|
Ronen Rosenbloom(4)
|
|
Common Stock
|
|
|
60,088
|
|
|
|
*
|
|
Isaac Zilberman(5)
|
|
Common Stock
|
|
|
60,088
|
|
|
|
*
|
|
Lior Amit(6)
|
|
Common Stock
|
|
|
60,088
|
|
|
|
*
|
|
Inbal Kreiss
|
|
Common Stock
|
|
|
–
|
|
|
|
–
|
|
Moshe (Mori) Arkin(7)
|
|
Common Stock
|
|
|
14,330,580
|
|
|
|
20.71
|
%
|
Zeev Vurembrand
|
|
Common Stock
|
|
|
–
|
|
|
|
–
|
|
Yovav Sameah
|
|
Common Stock
|
|
|
–
|
|
|
|
–
|
|
Tanya Yosef(8)
|
|
Common Stock
|
|
|
149,893
|
|
|
|
*
|
|
Amir Govrin(9)
|
|
Common Stock
|
|
|
299,787
|
|
|
|
*
|
|
Katrin Dlugach(10)
|
|
Common Stock
|
|
|
133,239
|
|
|
|
*
|
|
Directors and officers as
a group (12 individuals)
|
|
|
|
|
18,594,294
|
|
|
|
25.66
|
%
|
Medigus Ltd. (11)
|
|
Common Stock
|
|
|
18,099,630
|
|
|
|
29.13
|
%
|
M. Arkin (1999) Ltd. (12)
|
|
Common Stock
|
|
|
14,330,580
|
|
|
|
20.71
|
%
|
The More Group (13)
|
|
Common Stock
|
|
|
7,777,778
|
|
|
|
11.92
|
%
|
The Phoenix Group (14)
|
|
Common Stock
|
|
|
12,222,224
|
|
|
|
18.12
|
%
|
The Psagot Group (15)
|
|
Common Stock
|
|
|
11,111,112
|
|
|
|
16.61
|
%
|
Noked Long Limited Partnership
(16)
|
|
Common Stock
|
|
|
3,333,334
|
|
|
|
5.29
|
%
|
*
Less than 1%
(1)
|
Beneficial
ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to
securities. Each of the beneficial owners named in the table have, to our knowledge, direct ownership of and sole voting and investment
power with respect to the shares of Common Stock beneficially owned by them.
|
(2)
|
Consists
of 395,464 shares of Common Stock, options to purchase 1,699,454 shares of Common Stock and warrants to purchase 206,807 shares of
Common Stock, which are currently exercisable or will become exercisable within 60 days of June 23, 2021.
|
|
|
(3)
|
Consists
of 620,421 shares of Common Stock, options to purchase 164,771 shares of Common Stock and warrants to purchase 413,614 shares of
Common Stock, which are currently exercisable or will become exercisable within 60 days of June 23, 2021.
|
|
|
(4)
|
Consists
of 60,088 options to purchase shares of Common Stock, which are currently exercisable or will become exercisable within 60 days of
June 23, 2021.
|
|
|
(5)
|
Consists
of 60,088 options to purchase shares of Common Stock, which are currently exercisable or will become exercisable within 60 days of
June 23, 2021.
|
|
|
(6)
|
Consists
of 60,088 options to purchase shares of Common Stock, which are currently exercisable or will become exercisable within 60 days of
June 23, 2021.
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(7)
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Mr.
Moshe Arkin is the sole shareholder and sole director of M. Arkin (1999) Ltd. and may therefore be deemed to be the indirect beneficial
owner of the shares of Common Stock and warrants to purchase shares of Common Stock owned directly by M. Arkin (1999) Ltd.
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(8)
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Consists
of 149,893 options to purchase shares of Common Stock, which are currently exercisable or will become exercisable within 60 days
of June 23, 2021.
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(9)
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Consists
of 299,787 options to purchase shares of Common Stock, which are currently exercisable or will become exercisable within 60 days
of June 23, 2021.
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|
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(10)
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Consists
of 133,239 options to purchase shares of Common Stock, which are currently exercisable or will become exercisable within 60 days
of June 23, 2021.
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(11)
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Consists
of 17,312,159 shares of Common Stock and warrants to purchase 787,471 shares of Common Stock, which are currently exercisable or
will become exercisable within 60 days of June 23, 2021.
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(12)
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Consists
of 6,468,367 shares of Common Stock and 7,862,213 warrants to purchase shares of Common Stock, which are currently exercisable or
will become exercisable within 60 days of June 23, 2021.
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(13)
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The
More Group consists of (i) More Provident Funds LTD – Alfa More Provident Funds – Bond 25%, (ii) More Provident Funds
– Advanced Study Fund – Bond 25%, (iii) More Provident Funds LTD – Investment Fund – Bond 25%, (iv) More
Provident Funds LTD – Alfa More Provident Age 50, (v) More Provident Funds LTD – Alfa More Provident Over Age 60, (vi)
More Provident Funds LTD – Alfa More Provident Fund 50 – 60, (vii) More Provident Funds LTD – Alfa More Provident
Fund Stock, (viii) More Provident Funds LTD – Investment Fund – Stocks, (ix) More Provident Funds LTD – Investment
Fund – General, (x) More Provident Funds – Advanced Study Fund – Stocks, and (xi) More Provident Funds LTD –
Advanced Study Fund – General, of which hold 3,888,889 shares of Common Stock and warrants to purchase 3,888,889 shares of
Common Stock, which are currently exercisable or will become exercisable within 60 days of June 23, 2021.
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(14)
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The
Phoenix Group consists of (i) The Phoenix insurance LTD and (ii) Shotfut Menayot Israel Phoenix Amitim, of which hold 6,111,112 shares
of Common Stock and 6,111,112 warrants to purchase shares of Common Stock, which are currently exercisable or will become exercisable
within 60 days of June 23, 2021.
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(15)
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The
Psagot Group consists of (i) Kranot Hishtalmut Le Morim ve Gananot Hevra Menahelet LTD, (ii) Gal Provident Fund Management for Teachers
LTD, (iii) Gal Provident Fund Management for Teachers LTD - for Kupat Gemel Kalanit, (iv) OS – Hevra Lenihul Kupot Gemel LTD,
(v) Yahav P.R.H Provident Funds Management Company LTD, (vi) K.S.M - Keren Hishtalmut le Biochimaim LTD, (vii) Provident Fund of
the Employees of Haifa Municipality, (viii) Aram Gmulim Provident Fund Management LTD, (ix) Kav Habriut - Provident Fund Management
LTD Israel, (x) Mishpetanim Education Fund for Lawyers Management Company LTD, (xi) Management Company of the Israeli Judges Study
Fund LTD, (xii) PARETO HF, (xiii) Reut Management Company of Provident Fund LTD, (xiv) Further Education Found for Liberal Arts and
Social Scince LTD, (xv) WESURE INSURANCE, (xvi) Yahav Physicians Management Company for Provident Funds LTD, (xvii) Kelah - Social
Workers Study Fund Management Company LTD, (xviii) The Management Company of I.E.C. Workers Education Fund LTD, and (xix) Gal Provident
Fund Management for Teachers LTD - for Kupat Gemel Hagomel, of which hold 5,555,556 shares of Common Stock and warrant to purchase
5,555,556 shares of Common Stock which are currently exercisable or will become exercisable within 60 days of June 23, 2021.
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(16)
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Consists
of 1,666,667 shares of Common Stock and 1,666,667 warrants to purchase shares of Common Stock, which are currently exercisable or
will become exercisable within 60 days of June 23, 2021.
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DESCRIPTION
OF THE OFFERED SHARES
Our
authorized capital stock consists of 300,000,000 shares of Common Stock, par value $0.001 per share.
Common
Stock
Of
the authorized Common Stock, 61,342,216 shares are outstanding as of June 23, 2021. The holders of our Common Stock are entitled to receive
dividends from our funds legally available therefor only when, as and if declared by our board of directors, and are entitled to share
ratably in all of our assets available for distribution to holders of our Common Stock upon the liquidation, dissolution or winding-up
of our affairs. Holders of our Common Stock do not have any preemptive, subscription, redemption or conversion rights. Holders of our
Common Stock are entitled to one vote per share on all matters which they are entitled to vote upon at meetings of stockholders or upon
actions taken by written consent pursuant to Nevada corporate law. The holders of our Common Stock do not have cumulative voting rights,
which mean that the holders of a plurality of the outstanding shares can elect all of our directors. All of the shares of our Common
Stock currently issued and outstanding are fully-paid and nonassessable. No dividends have been paid to holders of our Common Stock since
our incorporation, and no cash dividends are anticipated to be declared or paid in the reasonably foreseeable future.
Anti-Takeover
Effects of Nevada Law
Business
Combination
The
“business combination” provisions of Sections 78.411 to 78.444, inclusive, of the Nevada Revised Statutes, or the NRS, generally
prohibit a Nevada corporation with at least 200 stockholders from engaging in various “combination” transactions with any
interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder,
unless the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; and extends
beyond the expiration of the three-year period, unless:
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the
transaction was approved by the board of directors prior to the person becoming an interested stockholder or is later approved by
a majority of the voting power held by disinterested stockholders, or
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if
the consideration to be paid by the interested stockholder is at least equal to the highest of: (a) the highest price per share paid
by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in
the transaction in which it became an interested stockholder, whichever is higher, (b) the market value per share of common stock
on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher,
or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher.
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A
“combination” is generally defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer
or other disposition, in one transaction or a series of transactions, with an “interested stockholder” having: (a) an aggregate
market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal
to 5% or more of the aggregate market value of all outstanding shares of the corporation, (c) 10% or more of the earning power or net
income of the corporation, and (d) certain other transactions with an interested stockholder or an affiliate or associate of an interested
stockholder.
In
general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years,
did own) 10% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in
control attempts and, accordingly, may discourage attempts to acquire the Company even though such a transaction may offer our stockholders
the opportunity to sell their stock at a price above the prevailing market price.
Control
Share Acquisition
The
“control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS apply to “issuing corporations,”
which are Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents,
and which conduct business directly or indirectly in Nevada. The control share statute prohibits an acquirer, under certain circumstances,
from voting its shares of a target corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer
obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: one-fifth or more
but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Generally, once
an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control
shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions
also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting
power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment
for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights.
A
corporation may elect to not be governed by, or “opt out” of, the control share provisions by making an election in its articles
of incorporation or bylaws, provided that the opt-out election must be in place on the tenth day following the date an acquiring person
has acquired a controlling interest, that is, crossing any of the three thresholds described above. We have not opted out of the control
share statutes, and will be subject to these statutes if we are an “issuing corporation” as defined in such statute.
At
this time, we do not have 100 stockholders of record resident in Nevada. Therefore, the provisions of the control share acquisition act
do not apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may
apply to us, the provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant
interest in or control of the Company, regardless of whether such acquisition may be in the interest of our stockholders.
Shares
Eligible for Future Sale
Rule
144
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Pursuant
to Rule 144 of the Securities Act, a person who has beneficially owned restricted shares of our common stock or warrants for at least
six months (or longer in the case of former shell companies as described below) would be entitled to sell their securities provided
that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding,
a sale, (ii) we are subject to the Exchange Act reporting requirements for at least 90 days before the sale and (iii) if the sale
occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.
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Persons
who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates
at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such
person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of: 1%
of total shares outstanding and the average weekly trading volume of such securities during the four calendar weeks preceding the
filing of a 144 notice with respect to such sale (which average volume criteria only applies if the company’s securities become
listed on Nasdaq or an exchange).
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These
provisions are, in each case, dependent on the Company being subject to the Exchange Act periodic reporting requirements for at least
three months before the sale. However, since our shares are quoted on the OTC Markets, which is not an “automated quotation system”,
our stockholders will not be able to rely on the market-based volume limitation described in the second bullet above. If, in the future,
our securities are listed on an exchange or quoted on Nasdaq, then our stockholders would be able to rely on the market-based volume
limitation. Unless and until our stock is so listed or quoted, our stockholders can only rely on the percentage based volume limitation
described in the first bullet above.
Such
sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell Companies
Our
Company was a shell company prior to December 30, 2019. The SEC has prohibited the use of Rule 144 for resale of securities issued by
any shell companies (other than business combination related shell companies) or any issuer that has been at any time previously a shell
company. The SEC has provided an exception to this prohibition, however, if the following conditions are met:
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the
issuer of the securities that was formerly a shell company has ceased to be a shell company;
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the
issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
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the
issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding
12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on
Form 8-K; and
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at
least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status
as an entity that is not a shell company, which we did on December 31, 2019.
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UNDERWRITING
Aegis
Capital Corp., or Aegis, is acting as the representative of the underwriters and the book-running manager of this offering. Under the
terms of an underwriting agreement, which is filed as an exhibit to the registration statement, each of the underwriters named below
has severally agreed to purchase from us the respective number of shares of common stock shown opposite its name below:
Underwriters
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Number
of Shares of Common Stock
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Aegis
Capital Corp.
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Total
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The
underwriting agreement provides that the underwriters’ obligation to purchase shares of Common Stock depends on the satisfaction
of the conditions contained in the underwriting agreement including:
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the
representations and warranties made by us to the underwriters are true;
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there
is no material change in our business or the financial markets; and
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we
deliver customary closing documents to the underwriters.
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Commissions
and Expenses
The
following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes
either no exercise or full exercise by the underwriters of their over-allotment option.
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Per
Share of Common Stock
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Total
with no Over-Allotment
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Total
with Full Over-Allotment
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Public offering price
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$
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Underwriting discount (7%)
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$
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Non-accountable expense allowance (1%)
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$
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Proceeds, before expenses, to us
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$
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(1)
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We
have agreed to pay a non-accountable expense allowance to the representative equal to 1.0% of the gross proceeds received from this
offering.
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The
representative has advised us that the underwriters propose to offer the Common Stock directly to the public at the public offering price
on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession
not in excess of $ per share of Common Stock. After the offering,
the representatives may change the offering price and other selling terms.
The
expenses of this offering that are payable by us are estimated to be approximately $
(excluding estimated underwriting discounts and commissions). We have also agreed to reimburse the underwriters for certain of their
expenses, in an amount up to $75,000, including for road show, diligence, and reasonable legal fees, as set forth in the underwriting
agreement.
Option
to Purchase Additional Shares
We
have granted the underwriters an option exercisable for 45 days after the date of this prospectus, to purchase, from time to time, in
whole or in part, up to an aggregate of
shares of Common Stock (15% of the shares the underwriters have committed to purchase) from us at the public offering price less underwriting
discounts and commissions. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions,
to purchase its pro rata portion of these additional shares based on the underwriter’s percentage underwriting commitment in this
offering as indicated in the table at the beginning of this Underwriting Section.
Lock-Up
Agreements
We,
all of our directors and executive officers have agreed that, for a period of 90 days after the date of this prospectus, subject to certain
limited exceptions, we and they will not directly or indirectly, without the prior written consent of Aegis, (i) offer for sale, sell,
pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any Shares of the Company (including, without limitation, shares of Common Stock
that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and shares of Common
Stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for
shares of Common Stock, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any
of the economic benefits or risks of ownership of shares of Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of shares of Common Stock or other securities, in cash or otherwise, (iii) file or cause to be filed
or make any demand for or exercise any right to have filed a registration statement, including any amendments thereto, with respect to
the registration of any shares of capital stock of the Company or securities convertible into or exercisable or exchangeable into shares
of capital stock of the Company or any of our other securities, or (iv) publicly disclose the intention to do any of the foregoing.
Aegis,
in its sole discretion, may release the shares of Common Stock and other securities subject to the lock-up agreements described above
in whole or in part at any time. When determining whether or not to release common stock and other securities from lock-up agreements,
Aegis will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of Common Stock
and other securities for which the release is being requested and market conditions at the time.
Offering
Price Determination
The
public offering price of our Common Stock herein was negotiated between Aegis and us. In determining the public offering price, Aegis
considered:
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the
history and prospects for the industry in which we compete;
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our
financial information;
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the
ability of our management and our business potential and earning prospects;
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the
prevailing securities markets at the time of this offering; and
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the
recent market prices of, and the demand for, publicly traded shares of generally comparable companies.
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Right
of First Refusal
If,
for the period ending twelve (12) months from the closing of the Offering, we or any of our subsidiaries (a) decides to finance or refinance
any indebtedness, Aegis (or any affiliate designated by Aegis) shall have the right (but not the obligation) to act as sole bookrunner,
sole manager, sole placement agent or sole agent with respect to such financing or refinancing; or (b) decides to raise funds by means
of a public offering (including an at-the-market facility) or a private placement or any other capital raising financing of equity, equity-linked
or debt securities, Aegis (or any affiliate designated by Aegis) shall have the right (but not the obligation) to act as sole book-running
manager, sole underwriter or sole placement agent for such financing.
Indemnification
We
have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute
to payments that the underwriters may be required to make for these liabilities.
Stabilization,
Short Positions and Penalty Bids
The
representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty
bids or purchases for the purpose of pegging, fixing or maintaining the price of the Common Stock, in accordance with Regulation M under
the Exchange Act:
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Stabilizing
transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
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A
short position involves a sale by the underwriters of shares of Common Stock in excess of the number of shares of Common Stock the
underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either
a covered short position or a naked short position. In a covered short position, the number of shares of Common Stock involved in
the sales made by the underwriters in excess of the number of shares of Common Stock they are obligated to purchase is not greater
than the number of shares of Common Stock that they may purchase by exercising their option to purchase additional shares of Common
Stock. In a naked short position, the number of shares of Common Stock involved is greater than the number of shares in their option
to purchase additional shares of Common Stock. The underwriters may close out any short position by either exercising their option
to purchase additional shares of Common Stock and/or purchasing shares of Common Stock in the open market. In determining the source
of the shares of Common Stock to close out the short position, the underwriters will consider, among other things, the price of shares
of Common Stock available for purchase in the open market as compared to the price at which they may purchase shares of Common Stock
through their option to purchase additional shares of Common Stock. A naked short position is more likely to be created if the underwriters
are concerned that there could be downward pressure on the price of the shares of Common Stock in the open market after pricing that
could adversely affect investors who purchase shares of Common Stock in the offering.
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Syndicate
covering transactions involve purchases of the shares of Common Stock in the open market after the distribution has been completed
in order to cover syndicate short positions.
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Penalty
bids permit the representatives to reclaim a selling concession from a syndicate member when the shares of Common Stock originally
sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
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These
stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price
of our Common Stock or preventing or retarding a decline in the market price of our Common Stock. As a result, the price of our Common
Stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the OTCQB or
otherwise and, if commenced, may be discontinued at any time.
Neither
we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither we nor any of the underwriters make any representation
that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued
without notice.
Electronic
Distribution
A
prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more
of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective
investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors
may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares of Common Stock for
sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same
basis as other allocations.
Other
than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any
information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the
registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling
group member in its capacity as underwriter or selling group member and should not be relied upon by investors.
Trading
Our
Common Stock is quoted on the OTCQB Market under the symbol “SCTC.” We have applied to list our Common Stock on the Nasdaq
Capital Market under the same symbol. No assurance can be given that our application will be approved or that a trading market will develop.
Discretionary
Sales
The
underwriters have informed us that they do not expect to sell more than 5% of the Common Stock in the aggregate to accounts over which
they exercise discretionary authority.
Other
Relationships
Certain
of the underwriters and their affiliates may in the future provide various investment banking, commercial banking and other financial
services for us and our affiliates for which they may in the future receive customary fees.
Offer
restrictions outside the United States
Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the Shares offered
by this prospectus in any jurisdiction where action for that purpose is required. The Shares offered by this prospectus may not be offered
or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer
and sale of any such Shares be distributed or published in any jurisdiction, except under circumstances that will result in compliance
with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any Shares offered by this prospectus in any jurisdiction in which
such an offer or a solicitation is unlawful
Israel
The
Shares offered by this prospectus have not been approved or disapproved by the Israel Securities Authority (the “ISA”), nor
have such Shares been registered for sale in Israel. The Shares may not be offered or sold, directly or indirectly, to the public in
Israel, absent the publication of a prospectus that has been approved by the ISA. The ISA has not issued permits, approvals or licenses
in connection with this offering or publishing this prospectus, nor has it authenticated the details included herein, confirmed their
reliability or completeness, or rendered an opinion as to the quality of the Shares being offered.
This
document does not constitute a prospectus under the Israeli Securities Law and has not been filed with or approved by the ISA. In the
State of Israel, this document may be distributed only to, and may be directed only at, and any offer of the Shares may be directed only
at, (i) to the extent applicable, a limited number of persons in accordance with the Israeli Securities Law and (ii) investors listed
in the first addendum to the Israeli Securities Law (the “Addendum”) consisting primarily of joint investment in trust funds,
provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange Ltd., underwriters,
venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,” each as defined in the
Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for their
own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified
investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of
same and agree to it.
LEGAL
MATTERS
The
validity of the Shares offered hereby will be passed upon for us by McDonald Carano LLP, Reno, Nevada. Certain other matters will be
passed upon for us by Meitar | Law Offices, Ramat Gan, Israel and by Carter Ledyard & Milburn LLP, New York, New York. Certain legal
matters of United States federal securities law related to the offering will be passed upon for the underwriter by Sichenzia Ross Ference
LLP, New York, New York. .
EXPERTS
The
financial statements as of December 31, 2020 and for the fiscal quarter ended March 31, 2021, as included in this Prospectus, have been
so included in reliance on the reports (which contains an explanatory paragraph relating to the Company’s ability to continue as
a going concern as described in Note 1b to the financial statements) of Brightman Almagor Zohar & Co., a firm in the Deloitte global
network, given on the authority of said firm as experts in auditing and accounting.
The
financial statements as of December 31, 2019 and for each of the two years in the period ended December 31, 2019, as included in this
Prospectus, have been so included in reliance on the report (which contains an explanatory paragraph relating to the Company’s
ability to continue as a going concern as described in Note 1b to the financial statements) of Kesselman & Kesselman Certified Public
Accountant (Isr.), a member of PricewaterhouseCoopers International Limited, an independent registered public accounting firm, given
on the authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act relating to the offering of these Shares. The registration
statement, including the attached exhibits and schedules, contains additional relevant information about us and the Shares. This prospectus
does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information
in respect of our Company and the Shares offered by this prospectus, you should refer to the registration statement, including the exhibits
and schedules thereto.
We
file annual, quarterly and other reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. You
can read our SEC filings, including the registration statement, at the SEC’s website at http://www.sec.gov.
You
may also obtain information about us by visiting our website at https://www.scoutcam.com. Information contained in our website
is not part of this prospectus.
You
should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information.
You should not rely on any other representations. Our affairs may change after this prospectus is distributed. You should not assume
that the information in this prospectus is accurate as of any date other than the date on the front of those documents.
SCOUTCAM
INC.
AND SUBSIDIARY
INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
CONSOLIDATED
FINANCIAL STATEMENTS
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
TABLE
OF CONTENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of ScoutCam Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of ScoutCam Inc. and its subsidiary (the “Company”) as of December
31, 2020 and the related consolidated statements of operations, shareholders’ equity (capital deficiency), and cash flows for the
year ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with
accounting principles generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1B to the financial statements, the Company’s accumulated losses and the additional funds needed to maintain its operations raise
substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described
in Note 1B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Development
Services Revenue and Contract Liabilities – Refer to Note 2J. and Note 10 to the Consolidated Financial Statements
Critical
Audit Matter Description
The
Company generates revenues from development services. The Company determines at contract inception whether development services are distinct
from the performance obligation to manufacture the product under development. Revenues from development services that are determined
as not distinct from the performance obligation to manufacture the product under development are deferred until commencement of manufacturing
and are recognized over the manufacturing term. During 2020, all development services revenues billed have been deferred and recorded
as contract liabilities (representing the majority of the contract liabilities balance of $848,000 as of December 31, 2020) and the respective
service costs have been deferred and recorded as contract fulfillment assets ($1,130,000 as of December 31, 2020), as the development
services were determined as not distinct from the performance obligation to manufacture the product under development.
We
identified the assessment of whether development services were a distinct performance obligation and the impact on the timing of revenue
recognition as a critical audit matter. Evaluating whether development services should be accounted for separately required judgment
and increased audit effort in comparison to our audit as a whole, because of the complexity of the technical accounting analysis and
due to the magnitude of the related contract liabilities as of December 31, 2020.
How
the Critical Audit Matter Was Addressed in the Audit
Our
audit procedures related to the Company’s determination of the performance obligations and the timing of revenue recognition for
development service contracts included the following, among others:
|
●
|
We
read the agreements and analyzed the terms of the Company’s development service contracts.
|
|
●
|
We
read communications between the Company and its clients relating to development services contracts.
|
|
●
|
We
inquired of Company research and development personnel to understand the commercial facts and circumstances relating to development
services contracts.
|
|
●
|
We
evaluated the Company’s interpretation and application of the relevant requirements of generally accepted accounting principles
in relation to the development services contracts and the related contract liabilities.
|
Brightman
Almagor Zohar & Co.
Certified
Public Accountants
A
Firm in the Deloitte Global Network
Tel
Aviv, Israel
March
31, 2021
We
have served as the Company’s auditor since 2020.
Report
of Independent Registered Public Accounting Firm
To
the Shareholders and Board of Directors of ScoutCam Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheet of ScoutCam Inc. and its subsidiary (the “Company”) as of December
31, 2019, and the related consolidated statements of operations, of changes in shareholders’ equity (capital deficiency) and of cash
flows for each of the two years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019, and the results of its operations and its cash flows for each of the two years in the
period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed
in Note 1(b) to the consolidated financial statements, the Company has suffered recurring losses from operations and cash outflows from
operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these
matters are also described in Note 1(b). The consolidated financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/
Kesselman & Kesselman
|
|
Certified
Public Accountants (Isr.)
|
|
A
member firm of PricewaterhouseCoopers International Limited
|
|
Tel-Aviv,
Israel
March
16, 2020
We
served as the Company’s auditor from 2019 to 2020.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
CONSOLIDATED
BALANCE SHEETS
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
USD
in thousands
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
3,373
|
|
|
|
3,245
|
|
Accounts
receivable
|
|
|
17
|
|
|
|
22
|
|
Inventory
|
|
|
244
|
|
|
|
900
|
|
Receivable
from Parent Company
|
|
|
47
|
|
|
|
73
|
|
Other
current assets
|
|
|
348
|
|
|
|
78
|
|
Total
current assets
|
|
|
4,029
|
|
|
|
4,318
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Contract
fulfillment assets
|
|
|
1,130
|
|
|
|
-
|
|
Property
and equipment, net
|
|
|
269
|
|
|
|
59
|
|
Operating
lease right-of-use assets
|
|
|
107
|
|
|
|
53
|
|
Severance
pay asset
|
|
|
360
|
|
|
|
327
|
|
Total
non-current assets
|
|
|
1,866
|
|
|
|
439
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
5,895
|
|
|
|
4,757
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
79
|
|
|
|
35
|
|
Contract
liabilities
|
|
|
69
|
|
|
|
502
|
|
Operating
lease liabilities - short term
|
|
|
60
|
|
|
|
24
|
|
Accrued
compensation expenses
|
|
|
369
|
|
|
|
297
|
|
Loan
from Parent Company
|
|
|
-
|
|
|
|
500
|
|
Other
accrued expenses
|
|
|
195
|
|
|
|
552
|
|
Total
current liabilities
|
|
|
772
|
|
|
|
1,910
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Contract
liabilities
|
|
|
779
|
|
|
|
-
|
|
Operating
lease liabilities - long term
|
|
|
47
|
|
|
|
29
|
|
Liability
for severance pay
|
|
|
333
|
|
|
|
296
|
|
Total
non-current liabilities
|
|
|
1,159
|
|
|
|
325
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
1,931
|
|
|
|
2,235
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
|
Ordinary
shares Common stock, $0.001 par value; 75,000,000 shares authorized, 36,756,983 and 26,884,921
shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
|
|
37
|
|
|
|
27
|
|
Additional
paid-in capital
|
|
|
10,234
|
|
|
|
4,135
|
|
Accumulated
deficit
|
|
|
(6,307
|
)
|
|
|
(1,640
|
)
|
TOTAL
SHAREHOLDERS’ EQUITY
|
|
|
3,964
|
|
|
|
2,522
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
5,895
|
|
|
|
4,757
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Year
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
USD
in thousands
(except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
(*):
|
|
|
|
|
|
|
|
|
|
|
|
|
PRODUCTS
|
|
|
491
|
|
|
|
188
|
|
|
|
174
|
|
SERVICES
|
|
|
-
|
|
|
|
121
|
|
|
|
217
|
|
|
|
|
491
|
|
|
|
309
|
|
|
|
391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
PRODUCTS
|
|
|
994
|
|
|
|
421
|
|
|
|
104
|
|
SERVICES
|
|
|
-
|
|
|
|
121
|
|
|
|
117
|
|
|
|
|
994
|
|
|
|
542
|
|
|
|
221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT (LOSS)
|
|
|
(503
|
)
|
|
|
(233
|
)
|
|
|
170
|
|
RESEARCH
AND DEVELOPMENT EXPENSES
|
|
|
725
|
|
|
|
274
|
|
|
|
183
|
|
SALES
AND MARKETING EXPENSES
|
|
|
443
|
|
|
|
183
|
|
|
|
270
|
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
3,035
|
|
|
|
1,117
|
|
|
|
240
|
|
OPERATING
LOSS
|
|
|
(4,706
|
)
|
|
|
(1,807
|
)
|
|
|
(523
|
)
|
FINANCING
INCOME (EXPENSES), NET
|
|
|
41
|
|
|
|
(20
|
)
|
|
|
**
|
|
LOSS
BEFORE TAXES ON INCOME
|
|
|
(4,665
|
)
|
|
|
(1,827
|
)
|
|
|
(523
|
)
|
TAXES
ON INCOME
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
NET
LOSS
|
|
|
(4,667
|
)
|
|
|
(1,829
|
)
|
|
|
(524
|
)
|
Net
loss per ordinary share (basic and diluted, in USD)
|
|
|
(0.15
|
)
|
|
|
(0.11
|
)
|
|
|
(0.03
|
)
|
Weighted
average ordinary shares (basic and diluted, in thousands)
|
|
|
31,753
|
|
|
|
16,190
|
|
|
|
16,131
|
|
|
*
|
As
for revenues related to transaction with the Parent Company – see Note 11
|
|
**
|
Less than 1 thousand
|
The
accompanying notes are an integral part of these consolidated financial statements.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CAPITAL DEFICIENCY)
|
|
Ordinary
shares
|
|
|
Additional
paid-in capital
|
|
|
Accumulated
deficit
|
|
|
Total
Shareholders’ equity (Capital deficiency)
|
|
|
|
Shares
in
thousands
|
|
|
amount
|
|
|
USD
in thousands
|
|
Balance
at January 1, 2020
|
|
|
26,885
|
|
|
$
|
27
|
|
|
|
4,135
|
|
|
|
(1,640
|
)
|
|
|
2,522
|
|
Issuance of shares
and warrants
|
|
|
6,092
|
|
|
$
|
6
|
|
|
|
2,852
|
|
|
|
-
|
|
|
|
2,858
|
|
Exercise of warrants
|
|
|
2,993
|
|
|
$
|
3
|
|
|
|
1,726
|
|
|
|
-
|
|
|
|
1,729
|
|
Stock
based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
1,141
|
|
|
|
-
|
|
|
|
1,141
|
|
Conversion
of loan from Parent Company
|
|
|
787
|
|
|
$
|
1
|
|
|
|
380
|
|
|
|
-
|
|
|
|
381
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,667
|
)
|
|
|
(4,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2020
|
|
|
36,757
|
|
|
$
|
37
|
|
|
|
10,234
|
|
|
|
(6,307
|
)
|
|
|
3,964
|
|
|
|
Ordinary
shares
|
|
|
Additional
paid-in capital
|
|
|
Parent
Company deficit
|
|
|
Accumulated
deficit
|
|
|
Total
Shareholders’ equity (Capital deficiency)
|
|
|
|
Shares
in
thousands
|
|
|
USD
in thousands
|
|
Balance
at January 1, 2019
|
|
|
16,131
|
|
|
|
16
|
|
|
|
(16
|
)
|
|
|
(118
|
)
|
|
|
-
|
|
|
|
(118
|
)
|
Net
transfer from Parent Company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
514
|
|
|
|
-
|
|
|
|
514
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(189
|
)
|
|
|
(1,640
|
)
|
|
|
(1,829
|
)
|
Consummation
of the carve-out
|
|
|
-
|
|
|
|
-
|
|
|
|
207
|
|
|
|
(207
|
)
|
|
|
-
|
|
|
|
-
|
|
Capital
contribution from Parent Company
|
|
|
-
|
|
|
|
-
|
|
|
|
720
|
|
|
|
-
|
|
|
|
-
|
|
|
|
720
|
|
Sale
of assets to Parent Company
|
|
|
-
|
|
|
|
-
|
|
|
|
168
|
|
|
|
-
|
|
|
|
-
|
|
|
|
168
|
|
Effect
of reverse recapitalization
|
|
|
10,754
|
|
|
|
11
|
|
|
|
3,029
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,040
|
|
Share
based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
27
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27
|
|
Balance
at December 31, 2019
|
|
|
26,885
|
|
|
|
27
|
|
|
|
4,135
|
|
|
|
-
|
|
|
|
(1,640
|
)
|
|
|
2,522
|
|
|
|
Ordinary
shares
|
|
|
Additional
paid-in capital
|
|
|
Parent
Company deficit
|
|
|
Total
Shareholders’ equity (Capital deficiency)
|
|
|
|
Shares
in
thousands
|
|
|
USD
in thousands
|
|
Balance
at January 1, 2018
|
|
|
16,131
|
|
|
|
16
|
|
|
|
(16
|
)
|
|
|
(117
|
)
|
|
|
(117
|
)
|
Net
transfer from Parent Company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
523
|
|
|
|
523
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(524
|
)
|
|
|
(524
|
)
|
Balance
at December 31, 2018
|
|
|
16,131
|
|
|
|
16
|
|
|
|
(16
|
)
|
|
|
(118
|
)
|
|
|
(118
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
USD
in thousands
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(4,667
|
)
|
|
|
(1,829
|
)
|
|
|
(524
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
66
|
|
|
|
6
|
|
|
|
5
|
|
Share based compensation
|
|
|
1,107
|
|
|
|
27
|
|
|
|
25
|
|
Loss
(profit) from exchange differences on cash and cash equivalents
|
|
|
(85
|
)
|
|
|
5
|
|
|
|
-
|
|
Other
non-cash items
|
|
|
4
|
|
|
|
(10
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHANGES
IN OPERATING ASSET AND LIABILITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
5
|
|
|
|
68
|
|
|
|
(85
|
)
|
Decrease
(increase) in inventory
|
|
|
693
|
|
|
|
(819
|
)
|
|
|
(25
|
)
|
Other
current assets
|
|
|
(270
|
)
|
|
|
(16
|
)
|
|
|
(62
|
)
|
Account
payables
|
|
|
44
|
|
|
|
16
|
|
|
|
-
|
|
Contract
fulfillment assets
|
|
|
(1,130
|
)
|
|
|
-
|
|
|
|
-
|
|
Contract
liability
|
|
|
346
|
|
|
|
302
|
|
|
|
192
|
|
Accrued
compensation expenses
|
|
|
72
|
|
|
|
166
|
|
|
|
(13
|
)
|
Receivable
from Parent Company
|
|
|
(15
|
)
|
|
|
(73
|
)
|
|
|
-
|
|
Other
accrued expenses
|
|
|
(357
|
)
|
|
|
358
|
|
|
|
32
|
|
Net
cash flows used in operating activities
|
|
|
(4,187
|
)
|
|
|
(1,799
|
)
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(276
|
)
|
|
|
(52
|
)
|
|
|
-
|
|
Change
in severance pay asset
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
4
|
|
Net
cash flows generated from (used in) investing activities
|
|
|
(276
|
)
|
|
|
(55
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of shares and warrants
|
|
|
2,858
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from exercise
of warrants
|
|
|
1,729
|
|
|
|
-
|
|
|
|
-
|
|
Repayment
of loan from Parent Company
|
|
|
(81
|
)
|
|
|
-
|
|
|
|
-
|
|
Transfer
from Parent Company
|
|
|
-
|
|
|
|
514
|
|
|
|
450
|
|
Sale
of assets to Parent Company
|
|
|
-
|
|
|
|
168
|
|
|
|
-
|
|
Capital
contribution from Parent Company
|
|
|
-
|
|
|
|
720
|
|
|
|
-
|
|
Loan
from Parent Company
|
|
|
-
|
|
|
|
500
|
|
|
|
-
|
|
Cash
obtained in connection with Recapitalization Transaction
|
|
|
-
|
|
|
|
3,202
|
|
|
|
-
|
|
Net
cash flows provided by financing activities
|
|
|
4,506
|
|
|
|
5,104
|
|
|
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE
IN CASH AND CASH EQUIVALENTS
|
|
|
43
|
|
|
|
3,250
|
|
|
|
-
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
|
|
3,245
|
|
|
|
-
|
|
|
|
-
|
|
PRPFITS
(LOSSES) FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS
|
|
|
85
|
|
|
|
(5
|
)
|
|
|
-
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS AT END OF YEAR
|
|
|
3,373
|
|
|
|
3,245
|
|
|
|
-
|
|
Non
cash activities -
|
|
Year
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
USD
in thousands
|
|
Loan
from Parent Company settled against receivable from Parent Company
|
|
|
41
|
|
|
|
-
|
|
|
|
-
|
|
Conversion
of a loan from Parent Company
|
|
|
381
|
|
|
|
-
|
|
|
|
-
|
|
SUPPLEMENTAL
INFORMATION FOR CASH FLOW:
|
|
As
of
December
30, 2019
|
|
|
|
|
|
Assets
acquired (liabilities assumed):
|
|
|
|
|
|
|
|
|
|
Current
assets excluding cash and cash equivalents
|
|
$
|
-
|
|
Current
liabilities
|
|
|
(73
|
)
|
Recapitalization
Transaction costs
|
|
|
(89
|
)
|
Reverse
recapitalization effect on equity
|
|
|
(3,040
|
)
|
|
|
|
|
|
Cash
obtained in connection with Recapitalization Transaction
|
|
$
|
3,202
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE 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. The Company was
initially engaged in the business of developing web portals to allow companies and individuals
to engage in the purchase and sale of vegetarian food products over the Internet. The Company
was unable to execute its original business plan, develop significant operations or achieve
commercial sales. Prior to the closing of the Securities Exchange Agreement (as defined below),
the Company was a “shell company”.
ScoutCam
Ltd. (the “Subsidiary”, “ScoutCam”), was formed in the State of Israel on January 3, 2019 as a wholly-owned subsidiary
of Medigus Ltd. (the “Parent Company”, “Medigus”), an Israeli company traded both on the Nasdaq Capital Market
and the Tel Aviv Stock Exchange, and commenced operations on March 1, 2019. Upon incorporation, the Subsidiary issued to Medigus 1,000,000
ordinary shares with no par value. On March 2019, the Subsidiary issued to Medigus an additional 1,000,000 ordinary shares with no par
value.
The
Subsidiary was incorporated as part of a reorganization of Medigus, which was designed to distinguish the Subsidiary’s miniaturized
imaging business, or the micro ScoutCam™ 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 miniaturized imaging business. In December 2019, Medigus and
the Subsidiary consummated a certain Amended and Restated Asset Transfer Agreement, under which Medigus transferred and assigned certain
assets and intellectual property rights related to its miniaturized imaging business to the Subsidiary.
On
September 16, 2019, Intellisense entered into a Securities Exchange Agreement (the “Exchange Agreement”), with Medigus, pursuant
to which Medigus assigned, transferred and delivered 100% of its holdings in the Subsidiary to Intellisense, in exchange for consideration
consisting of shares of Intellisense’s common stock representing 60% of the issued and outstanding share capital of Intellisense
immediately upon the closing of the Exchange Agreement (the “Closing”). In addition, the Exchange Agreement provides that
if ScoutCam achieves an aggregated amount of USD 33 million in sales within the first three years immediately after the Closing, the
Company will issue to Medigus 2,688,492 additional shares of Company’s common stock. The Closing occurred on December 30, 2019
(the “Closing Date”). On December 31, 2019, Intellisense changed its name to ScoutCam Inc.
Although
the transaction resulted in the Subsidiary becoming a wholly owned subsidiary of Intellisense, the transaction constituted a reverse
recapitalization since Medigus, the only shareholder of the Subsidiary prior to the Exchange Agreement, was issued a majority of the
outstanding capital stock of Intellisense upon consummation of the Exchange Agreement, and also taking into account that prior to the
Closing Date, Intellisense was considered as a shell corporation. Accordingly, the Subsidiary is considered the accounting acquirer of
the merged company.
“Group”
- the Company together with ScoutCam.
The
Subsidiary has developed a range of micro CMOS (complementary metal-oxide semiconductor) and CCD (charge-coupled device) video cameras,
including micro ScoutCam™ 1.2. These innovative cameras are suitable for both medical and industrial applications. Based on its
proprietary technology, the Subsidiary designs and manufactures endoscopy and micro camera systems for partner companies.
|
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – GENERAL (continued):
|
b.
|
During
the year ended December 31, 2020, the Company incurred a loss of USD 4,667 thousand and negative cash flows from operating activities
of approximately USD 4,187 thousand. Based on the projected cash flows, the Company’s Management is of the opinion that without
further fundraising it will not have sufficient resources to enable it to continue its operating activities including the development,
manufacturing and marketing of its products within one year after the issuance date of these consolidated financial statements. As a
result, there is a substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance
date of these financial statements.
Management
did not take into account the proceeds from the private placement (see note 13c), because the closing of the private placement didn’t
occur as of the date of issuance of these financial statements.
Management’s
plans include continuing commercialization of the Company’s products and securing sufficient financing through the sale of additional
equity securities, debt or capital inflows from strategic partnerships and other opportunities. There are no assurances however, that
the Company will be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in commercializing
its products and securing sufficient financing, it may need to reduce activities, curtail or even cease operations.
These
consolidated financial statements have been prepared assuming the Company will continue as a going concern, which assumes the realization
of assets and the satisfaction of liabilities and commitments in the normal course of business. Accordingly, the consolidated financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets and the amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
|
|
c.
|
The
COVID-19 pandemic has had a significant impact on global markets and the global economy, including countries in which the Company
operates. As the extent of the impact on the global economy remains unclear, the Company anticipates that it will have a continuing
impact on global economies in the near and long-term future. In light of the below mentioned factors, the COVID-19 pandemic had and
most likely will continue to have a material effect on the Company’s operations, and the extent to which the COVID-19 pandemic
will impact the Company’s operations will depend on future developments. In particular, the continued spread of COVID-19 globally
had and most likely will continue to have material adverse impact on the Company’s operations and workforce, including its
manufacturing activities, product sales, as well as its ability to continue to raise capital. Travel restrictions had and most likely
will continue to have a material adverse impact on Company’s sales and marketing and research and development efforts.
|
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES:
The
accounting treatment for the Exchange Agreement was as a reverse recapitalization of ScoutCam, for financial accounting and reporting
purposes. As such, ScoutCam Ltd. is treated as the acquirer for accounting and financial reporting purposes while the Company is treated
as the acquired entity for accounting and financial reporting purposes. As a result, the comparative figures that are reflected in the
Company’s financial statements are those of ScoutCam and from the Closing Date, the Company’s assets, liabilities and results
of operations are consolidated with the assets, liabilities and results of operations of ScoutCam.
The
consolidated financial statements reflect the Company’s financial position, results of operations, changes in shareholders equity
(capital deficiency) and cash flows in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
The
accompanying comparative financial statements include the historical accounts of ScoutCam as a “Carve-out Business”, a division
of Medigus. Throughout the comparative periods included in these financial statements, the Carve-out Business operated as part of Medigus.
Separate financial statements have not historically been prepared for the Carve-out Business.
These
comparative carve-out financial statements have been prepared on a standalone basis and are derived from Medigus’s consolidated
financial statements and accounting records. The carve-out comparative financial statements reflect ScoutCam’s financial position,
results of operations, changes in net Parent Company deficit and cash flows in accordance with U.S. GAAP.
The
financial position, results of operations, changes in net parent deficit, and cash flows of the Carve-out Business may not be indicative
of its results had it been a separate stand-alone entity during the comparative periods presented.
The
comparative carve-out financial statements of the Company include expenses which were allocated from Medigus for certain functions, including
general corporate expenses related to corporate strategy, procurement, Information Technology (“IT”), Human Resources (“HR”)
and legal. These allocation have been made on the basis of direct usage when identifiable, with the remainder allocated on the basis
of headcount. Management believes the expense allocation methodology and results are reasonable and consistently applied for all comparative
periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred by an independent
company or of the costs to be incurred in the future.
The
carve-out comparative financial statements include assets and liabilities specifically attributable to the Carve-out Business. Transfers
of cash between Carve-out Business and Medigus are included within “Transfers from Parent Company” on the Statements of Cash
Flows and the Statements of changes in shareholder’s equity (capital deficiency).
As
the carve-out comparative financial statements have been prepared on a carve-out basis, the amounts reflected in Parent Company deficit
in the comparative statement of changes in shareholder’s equity (capital deficiency) refer to net loss for the period attributed
to ScoutCam.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
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, as well as in estimates used in applying
the revenue recognition policy. Actual results may differ from those estimates.
A
majority of ScoutCam’s revenues are generated in U.S. dollars. The substantial majority of ScoutCam costs are incurred in U.S.
dollars and New Israeli Shekels (“NIS”). ScoutCam management believes that the U.S. dollar is the currency of the primary
economic environment in which ScoutCam operates. Thus, the functional currency of ScoutCam is the U.S. dollar.
Transactions
and balances originally denominated in U.S. dollars are presented at their original amounts. Balances in non U.S. dollar currencies are
translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S.
dollar transactions and other items in the statements of operations (indicated below), the following exchange rates are used: (i) for
transactions exchange rates at transaction dates and (ii) for other items (derived from non-monetary balance sheet items such as depreciation
and amortization) historical exchange rates. Currency transaction gains and losses are presented in financial income or expenses, as
appropriate.
|
d.
|
Cash
and Cash Equivalents
|
The
Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits with original
maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible
to known amounts of cash.
Accounts
receivable are presented in the Company’s consolidated balance sheets net of allowance for doubtful accounts. The Company estimates
the collectibility of its accounts receivable balances and adjusts its allowance for doubtful accounts accordingly.
When
revenue recognition criteria are not met for a sale transaction that has been billed, the Company does not recognize deferred revenues
or the related account receivable.
As
of December 31, 2020 and 2019, no allowance for doubtful accounts was recorded.
|
f.
|
Property
and equipment
|
Property
and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis
over the estimated useful lives.
The
annual depreciation rates are as follows:
|
|
%
|
Machinery
and laboratory equipment
|
|
10%-15%
|
Office
furniture and equipment
|
|
10%
|
Computers
and computer software
|
|
33%
|
Leasehold
improvements
|
|
Over
the shorter of the lease term (including options if any) or useful life
|
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
Israeli
labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other
circumstances. Pursuant to Section 14 of the Severance Compensation Act, 1963 (“Section 14”), all of the Company’s
employees in Israel are entitled a monthly contribution, at a rate of 8.33% of their monthly salary, made in their name with insurance
companies. Contributions under Section 14 relieve the Company from any future severance payment obligation with respect to those employees.
The aforementioned contributions are not recorded as an asset on the Company’s balance sheet, and there is no liability recorded
as the Company does not have a future obligation to make any additional payments.
The
asset and the liability for severance pay presented in the balance sheets reflects employees that began employment prior to automatic
application of Section 14.
The
severance pay liability of the Company to its employees that began employment prior to automatic application of Section 14 based upon
the number of years of service and the latest monthly salary and is partly covered by regular deposits with recognized pension funds
and deposits with severance pay funds. Under labor laws, these deposits are in the employees’ names and, subject to certain limitations,
are the property of the employees. The Company records the obligation as if it were payable at each balance sheet date on an undiscounted
basis.
|
h.
|
Stock-Based
Compensation
|
The
Company measures and recognizes compensation expense for its equity classified stock-based awards, including option awards exercisable
into shares of common stock of the Parent Company under its plan based on estimated fair values on the grant date. The Company calculates
the fair value of option awards on the grant date using the Black-Scholes option pricing model. The Black-Scholes option-pricing model
requires a number of assumptions, of which the most significant are the stock price volatility and the expected option term. For the
years ended December 31, 2019, and 2018, the volatility was based on the historical stock volatility of the Parent Company. The Company’s
expected dividend rate is zero since the Company does not currently pay cash dividends on its stocks and does not anticipate doing so
in the foreseeable future. Each of the above factors requires the Company to use judgment and make estimates in determining the percentages
and time periods used for the calculation. If the Company were to use different percentages or time periods, the fair value of option
awards could be materially different. The Company recognizes stock-based compensation cost for option awards on a accelerated basis over
the employee’s requisite service period, net of estimated forfeitures.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
Inventories
include raw materials, inventory in process and finished products and are valued at the lower of cost or net realizable value.
The
cost is determined on the basis of “first in-first out” basis. Cost of purchased raw materials and inventory in process includes
costs of design, raw materials, direct labor, other direct costs and fixed production overheads. Materials and other supplies held for
use in the production of inventories are not written down if the finished products in which they will be incorporated are expected to
be sold at or above cost.
The
Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following:
forecasted sales or usage, estimated current and future market values.
Commencing
January 1, 2018, the Company’s revenues are measured according to the ASC 606, “Revenue from Contracts with Customers”
(“ASC 606”). Under ASC 606, revenues are measured according to the amount of consideration that the Company expects to be
entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties,
such as VAT taxes. Revenues are presented net of VAT.
The
Company recognizes revenue when a customer obtains control over promised goods or services. For each performance obligation, the Company
determines at contract inception whether it satisfies the performance obligation over time or satisfies the performance obligation at
a point in time.
Performance
obligations are satisfied over time if one of the following criteria is met:
(a)
the customer simultaneously receives and consumes the benefits provided by the Company’s performance; (b) the Company’s performance
creates or enhances an asset that the customer controls as the asset is created or enhanced; or (c) the Company’s performance does
not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed
to date.
If
a performance obligation is not satisfied over time, a Company satisfies the performance obligation at a point in time.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 — SIGNIFICANT ACCOUNTING POLICIES (continued):
The
transaction price is allocated to each distinct performance obligations on a relative standalone selling price (“SSP”) basis
and revenue is recognized for each performance obligation when control has passed. In most cases, the Company is able to establish SSP
based on the observable prices of services sold separately in comparable circumstances to similar customers and for products based on
the Company’s best estimates of the price at which the Company would have sold the product regularly on a stand-alone basis. The
Company reassesses the SSP on a periodic basis or when facts and circumstances change.
Product
Revenue
Revenues
from product sales are recognized at a point in time when the customer obtains control of the Company’s product, typically upon
shipment to the customer. Sales taxes collected from customers relating to product sales and remitted to governmental authorities are
excluded from revenues.
Service
Revenue
The
Company also generates revenues from development services. Revenue from development services is recognized over the period of the applicable
service contract. To the extent development services are not distinct from the performance obligation relating to the subsequent mass
production phase of the prototype under development, revenue from these services is deferred until commencement of the production phase
of the project.
There
are no long-term payment terms or significant financing components of the Company’s contracts.
The
Company’s contract payment terms for product and services vary by customer. The Company assesses collectibility based on several
factors, including collection history.
Cost
of revenue consists of products purchased from sub-contractors, raw materials for in-house assembly line, shipping and handling costs
to customers, salary, employee-related expenses, depreciation and overhead expenses.
Cost
of revenues are expensed commensurate with the recognition of the respective revenues. Costs deferred in respect of deferral of revenues
are recorded as contract fulfilment assets on the Company’s balance sheet, and are written down to the extent the contract is expect
to incur losses.
|
l.
|
Research
and development costs
|
Research
and development costs are expensed as incurred and includes salaries and employee-related expenses, overhead expenses, material and third-party
contractor’s charges.
Income
taxes are accounted for using the asset and liability approach under ASC-740, “Income Taxes” (“ASC-740”). The
asset and liability approach require the recognition of taxes payable or refundable for the current year and deferred tax liabilities
and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.
The
measurement of current and deferred tax liabilities and assets is based on provisions of the relevant tax law. The measurement of deferred
tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.
Uncertain
tax positions are accounted for in accordance with the provisions of ASC 740-10, under which a company may recognize the tax benefit
from an uncertain tax position claimed or expected to be claimed on a tax return only if it is more likely than not that the tax position
will be sustained on examination by the taxation authorities, based on the technical merits of the position, at the largest benefit that
has a greater than fifty percent likelihood of being realized upon ultimate settlement. Interest and penalties, if any, related
to unrecognized tax benefits, are recognized in tax expense.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 — SIGNIFICANT ACCOUNTING POLICIES (continued):
From
time to time, the Company becomes involved in legal proceedings or is subject to claims arising in its ordinary course of business. Such
matters are generally subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues for contingencies
when the loss is probable, and it can reasonably estimate the amount of any such loss.
Basic
loss per share is computed by dividing net loss, by the weighted average number of ordinary shares as described below.
In
computing the Company’s diluted earnings per share, the numerator used in the basic earnings per share computation is adjusted
for the dilutive effect, if any, of the Company’s potential common stock. The denominator for diluted earnings per share is a computation
of the weighted-average number of ordinary shares and the potential dilutive shares common stock outstanding during the period.
The
loss per share information in these consolidated financial statements is reflected and calculated as if the Company had existed since
January 1, 2018. Accordingly, loss per share for all periods was calculated based on the number of ordinary shares retroactively adjusted
for the exchange ratio determined in the reverse recapitalization (see also note 3).
The
Company determines if an arrangement contains a lease at inception. Company’s leases do not contain any residual value guarantees
or material restrictive covenants.
The
rate implicit is most of Company’s leases are not reasonably determinable, therefore we use our incremental borrowing rate based
on the information available at the commencement date to determine the present value of the future lease payments.
Certain
of Company’s leases include variable costs. Variable costs include non-lease components that were incurred based upon actual terms
rather than contractually fixed amounts. In addition, variable costs are incurred for lease payments that are indexed to a change in
rate or index. Because the ROU asset recorded on the balance sheet was determined based upon factors considered at the commencement date,
subsequent changes in the rate or index that were not contemplated in the ROU asset balances recorded on the balance sheets result in
variable expenses being incurred when paid during the lease term. See Note 12.
The
Company has elected not to recognize on the balance sheet leases with terms of 12 months or less.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 - REVERSE RECAPITALIZATION
On
December 30, 2019, Intellisense and Medigus completed the Exchange Agreement. The accounting treatment for the Exchange Agreement was
as a reverse recapitalization transaction. Pursuant to the Exchange Agreement, Intellisense issued to Medigus 16,130,952 shares. Upon
such issuance, ScoutCam became a wholly-owned subsidiary of Intellisense. On December 31, 2019, Intellisense Solutions Inc. changed its
name to ScoutCam Inc.
Immediately
prior to the Closing Date the Company’s outstanding common stock was comprised of 3,927,346 shares of common stock $0.001 par value,
of which 1,352,666 shares were issued immediately prior to the Closing Date as part of the conversion of promissory notes to related
parties and the exercise of warrants by related parties, employees and service providers.
Also,
on the Closing Date, 3,413,312 units, each comprised of two shares of common stock par value USD 0.001 per share, one Warrant A (as defined
below) and two Warrants B (as defined below), were issued to investors as part of the financing transaction that the Company was obligated
to secure prior to the Closing. The immediate gross proceeds from the issuance of the units amounted to approximately USD 3.3 million.
Each
Warrant A was exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the12 month
period from the date of issuance. Each Warrant B is exercisable into one share of common stock of the Company at an exercise price of
USD 0.893 per share during the 18 month period from the date of issuance.
During
2020, 2,992,855 Warrants A were exercised. 420,457 unexercised Warrants A expired on December 30,2020.
While
ScoutCam Inc. was the legal acquirer, ScoutCam was treated as the acquiring company for accounting purposes as the Exchange Agreement
was accounted for as a reverse recapitalization which is equivalent to the issuance of 10,753,969 shares by ScoutCam for the net monetary
assets of ScoutCam Inc. As a result, the financial statements of the Company prior to the Closing Date are the historical financial statements
of ScoutCam Ltd. The financial statements of the Company after the Closing Date reflect the results of the operations of ScoutCam Ltd.
and ScoutCam Inc. on a combined basis. The net acquired assets of the Company as of the Closing Date was $3,040 thousands. There were
no fair value adjustments necessary to perform as the carrying values of the net acquired assets approximated fair value. Further, given
the nature of the operations of ScoutCam Inc. prior to the Closing Date, there were no intangible assets, including goodwill, established
as a result of the Exchange Agreement.
Under
the Exchange Agreement, the number of shares of common stock and USD amount for common stock is based on the nominal value and the shares
of common stock issued by ScoutCam Inc. (reflecting the legal structure of ScoutCam Inc. as the legal acquirer) on the Closing Date plus
shares of common stock issued by ScoutCam Inc. as part of the Exchange Agreement as described above. Historical stockholders’ equity
reflects the accounting acquirer, except for share number and USD amount adjusted for the shares exchange ratio pursuant to the Exchange
Agreement amounting to 8.065.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
4 - INVENTORY:
Composed
as follows:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
USD
in thousands
|
|
Raw
materials and supplies
|
|
|
45
|
|
|
|
24
|
|
Work in progress
|
|
|
-
|
|
|
|
316
|
|
Finished
goods
|
|
|
278
|
|
|
|
560
|
|
Inventory
write downs
|
|
|
(79
|
)
|
|
|
-
|
|
|
|
|
244
|
|
|
|
900
|
|
During
the year ended 2019, no impairment occurred.
NOTE
5 - PROPERTY AND EQUIPMENT, NET:
Property,
plant and equipment, net consisted of the following:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
USD
in thousands
|
|
Cost:
|
|
|
|
|
|
|
|
|
Machinery
and laboratory equipment
|
|
|
285
|
|
|
|
87
|
|
Leasehold
improvements, office furniture and equipment
|
|
|
36
|
|
|
|
25
|
|
Computers
and computer software
|
|
|
87
|
|
|
|
20
|
|
|
|
|
408
|
|
|
|
132
|
|
Less:
accumulated deprecation
|
|
|
(139
|
)
|
|
|
(73
|
)
|
Total
property and equipment, net
|
|
|
269
|
|
|
|
59
|
|
Depreciation
expenses were USD 66 thousand, USD 6 thousand and USD 5 thousand in the years ended December 31, 2020, 2019 and 2018, respectively.
NOTE
6 – OTHER ACCRUED EXPENSES:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
USD
in thousands
|
|
Unpaid
recapitalization transaction costs
|
|
|
-
|
|
|
|
89
|
|
IRS
(see note 7b)
|
|
|
73
|
|
|
|
73
|
|
Accrued
expenses
|
|
|
122
|
|
|
|
390
|
|
|
|
|
195
|
|
|
|
552
|
|
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
7 - INCOME TAXES:
The
Company and its subsidiary are taxed under the domestic tax laws of the jurisdiction of incorporation of each entity (United States and
Israel).
Income
from Israel was taxed at the corporate tax rate of 23%.
ScoutCam
Inc. was incorporated in the United States and is subject to the Federal and State tax laws established in the United States.
On
December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act reduces the corporate tax rate to 21
percent from 35 percent, among other things.
|
b.
|
ScoutCam
Inc. did not timely file its tax return for 2013-2014 and therefore the IRS imposed penalties in the amount of $60 thousand (approximately
$73 thousands including interest).
|
|
c.
|
Israel
tax loss carry forwards
|
As
of December 31, 2020, the Company has accumulated losses for tax purposes that were generated in Israel. These losses may be carried
forward and offset against taxable income in the future for an indefinite period. A full valuation allowance was created against the
Company’s deferred tax assets generated in Israel. Management currently believes that it is more likely than not that the deferred
taxes generated in Israel will not be realized in the foreseeable future.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
8 – RELATED PARTIES:
|
a.
|
On
May 30, 2019, ScoutCam entered into an intercompany agreement with Medigus (the “Intercompany
Agreement”) according to which ScoutCam agreed to hire and retain certain services
from Medigus. The agreed upon services provided under the Intercompany Agreement included:
(1) lease of office space and clean room based on actual space utilized by ScoutCam and in
shared spaces according to employee ratio; (2) utilities such as electricity water, IT and
communication services based on employee ratio; (3) car services, including car rental, gas
usage, payment for toll roads based on 100% of expense incurred from a ScoutCam employee
car; (4) external accountant services at a price of USD 6,000 per annum; (5) directors and
officers insurance at a sum of 1/3 of Parent Company cost; (6) CFO services at a sum of 50%
of Parent Company CFO employer cost; (7) every direct expense of ScoutCam that is paid by
the Parent Company in its entirety subject to approval of such direct expenses in advance;
and (8) any other mutual expense that is borne by the parties according to the respective
portion of the Mutual Expense.
|
The
total expenses for year ended December 31, 2019 amounted to USD 329 thousand. As of December 31, 2019, the balance with Medigus amounted
to USD 73 thousand.
On
April 20, 2020, the Subsidiary entered into an amended and restated intercompany services agreement with Medigus. The agreed upon services
provided under the amended and restated Intercompany Agreement included:
1)
lease of office space based on actual space utilized by the Parent Company and in shared spaces according to employee ratio; (2) utilities
such as electricity water, IT and communication services based on employee ratio; (3) car services, including car rental, gas usage,
payment for toll roads based on 100% of expense incurred from a Subsidiary employee car; (5) directors and officers insurance the Parent
Company shall pay $150,000 of the annual premium.; (6) CFO services at a sum of 50% of Parent Company CFO employer cost; (7) every direct
expense of the Subsidiary that is paid by the Parent Company in its entirety subject to approval of such direct expenses in advance;
and (7) any other mutual expense that is borne by the parties according to the respective portion of the mutual expense.
The
total net expenses for year ended December 31, 2020 amounted to USD 143 thousand. As of December 31, 2020, the balance with Medigus amounted
to USD 47 thousand.
In
addition, ScoutCam’s employees provide support services to Medigus. For additional information see note 11b.
|
b.
|
On
June 3, 2019, the Parent Company executed a capital contribution with ScoutCam whereby it
paid an aggregate amount of USD 720 thousand.
|
|
|
|
|
c.
|
On
July 31, 2019, ScoutCam and Prof. Benad Goldwasser entered into a consulting agreement, whereby
Prof. Goldwasser agreed to serve as chairman of the Board of Directors of ScoutCam. The consulting
agreement effective retroactively to March 1, 2019, in consideration for, inter alia,
a monthly fee of $10,000 and options representing 5% of Company’s fully-diluted share
capital as of the Closing Date.
|
|
|
|
|
d.
|
On
August 27, 2019, the Parent Company provided ScoutCam with a line of credit in the aggregate
amount of USD 500 thousand and, in exchange, ScoutCam agreed to grant the Parent Company
a capital note that will bear an annual interest rate of 4%. The repayment of the credit
line amount shall be spread over one year in monthly payments beginning January 2020. The
said note is presented in the consolidated balance sheets within “Loan from Parent
Company”.
|
|
|
|
|
|
On
June 23, 2020, the Company and Medigus entered into a certain Conversion Side Letter, pursuant to which the Company converted US$381,136
worth of outstanding credit previously extended by Medigus to the Company, which amount, as of the date thereof, included interest
accrued thereon. In accordance with the terms of the Conversion Side Letter, the Company issued to Medigus, at a purchase price of
US$0.968, (a) 787,471 shares of common stock, (b) warrants to purchase 393,736 shares of common stock at an exercise price of US$0.595,
and (c) warrants to purchase 787,471 shares of common stock at an exercise price of US$0.893.
|
|
|
|
|
e.
|
On
September 3, 2019, a certain Asset Transfer Agreement, by and between ScoutCam and the Parent Company dated May 28, 2019, became
effective. According to the Asset Transfer Agreement, the Company transferred certain assets (property and equipment) with a nil
carrying amount to the Parent Company in consideration of USD 168 thousand. The assets were then sold to a third party. The excess
of the said consideration over the carrying amount was directly recorded to shareholders’ equity.
|
|
|
|
|
f.
|
During
December 2019, the Company entered into a consulting agreement with Shrem Zilberman Group (the “Consultant”) in the amount
of USD 165 thousand (see also note 9b). A director of the Company is related to one of the Consultant’s shareholders.
|
|
|
|
|
g.
|
On
February 12, 2020, the Company’s Board of Directors authorized the grant of options to purchase 2,235,691 shares of common
stock of the Company to Professor Benad Goldwasser, the Company’s Chairman of the Board, and options to purchase 1,865,346
shares of common stock of the Company to certain officers of the Company. Each option is exercisable into one share of common stock
of the Company of $0.001 par value at an exercise price of $0.29. See also note 13b.
|
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
8 – RELATED PARTIES (continued):
|
h.
|
On
March 15, 2020, the Company’s Board of Directors approved, among other things, a quarterly
fee of $4,000 payable to each of the Company’s directors, excluding Professor Benad
Goldwasser; and a grant of options to purchase 576,888 shares of common stock of the Company
to each of the Company’s currently serving directors, excluding Professor Benad Goldwasser.
The terms of the options granted to the Company’s currently serving directors include
(i) an exercise price of $0.29 (ii) a vesting schedule whereby 33.33% of the options granted
will vest on the first anniversary of March 15, 2020, and 8.33% of the options will vest
at the end of each subsequent three-month period thereafter over the course of the following
two (2) years; and (iii) an acceleration mechanism pursuant to which any outstanding and
unvested option shall immediately accelerate and vest upon the occurrence of certain events,
including, inter alia, a merger or sale of all assets of the Company.
|
|
|
|
|
i.
|
On
April 20, 2020, Medigus and ScoutCam entered into that certain Intercompany Services Agreement,
which amended and restated the intercompany services agreement executed between the parties
on May 30, 2019. The agreement has an initial term of one year, and renews automatically
for additional one-year periods, unless either party provides 60 (sixty) days written notice
of non renewal. Either Medigus or ScoutCam may terminate the agreement for convenience upon
providing 60 (sixty) days prior written notice. The services to be provided by ScoutCam include,
inter alia, the provision of office space, utilities, car services, insurance and chief financial
officer services. In consideration for the foregoing services, ScoutCam is entitled to arm’s
length service fees based on the most recent transfer pricing analysis as performed by an
external expert, which may be adjusted from time to time.
|
|
|
|
|
j.
|
On
May 18, 2020, in connection with the Arkin Transaction (as defined below), the Company, Medigus
and Arkin (as defined below), entered into the Letter Agreement, whereby, provided the Company
obtains certain regulatory approvals described therein, Medigus and the Company agreed to
amend certain terms of the Amended and Restated Asset Transfer Agreement and the License
Agreement, thereby transferring outright certain patent assets from Medigus to the Company;
provided, however, that in the event the Company abandons the foregoing patent assets, the
Company must transfer back ownership of the patent assets to Medigus for no additional consideration
and absent any additional contingencies.
Also,
on May 18, 2020, and in connection with the Arkin Transaction, the Company, Medigus and Arkin entered into a Voting Agreement, pursuant
to which Arkin and Medigus each agreed to vote their respective shares of common stock in favor of the election of the opposite party’s
designated representative(s), as applicable, to the Board. Each of Arkin’s and Medigus’ rights under the Voting Agreement
are contingent upon, inter alia, such party maintaining a certain beneficial ownership threshold in the Company, as follows:
at
each annual or special meeting of stockholders at which an election of directors is held or pursuant to any written consent of the stockholders,
(a) one person designated by Arkin shall be elected to the Board, for so long as Arkin, together with its Affiliates, continues to own
beneficially at least eight (8%) of the issued and outstanding capital stock of the Company (“Arkin Director”), and
(b) (i) three persons designated by Medigus shall be elected to the Board, for so long as Medigus, together with its Affiliates, continues
to own beneficially at least thirty five (35%) of the issued and outstanding capital stock of the Company, or (ii) two persons designated
by Medigus for so long as Medigus, together with its Affiliates, continues to own beneficially less than thirty five (35%) and more than
twenty (20%) of the issued and outstanding capital stock of the Company, or (iii) one person designated by Medigus for so long as Medigus,
together with its Affiliates, continues to own beneficially less than twenty (20%) and more than eight (8%) of the issued and outstanding
capital stock of the Company.
|
|
|
|
|
k.
|
On
June 22, 2020, the Company’s Board of Directors authorized the grant of options to
purchase 628,163 shares of common stock to Prof. Benad Goldwasser, Chairman of the Board,
and 628,162 options to purchase shares of common stock to CEO and director of the Company.
Each option is exercisable into one share of common stock at an exercise price of $0.29.
|
|
|
|
|
l.
|
On
November 11, 2020, the Company’s Board of Directors authorized the grant of options
to purchase 144,222 shares of common stock to director of the Company. Each option is exercisable
into one share of common stock at an exercise price of $0.35.
|
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
9 - EQUITY:
Reverse
Recapitalization:
|
|
As
discussed in note 3, the Recapitalization is accounted for as a reverse recapitalization with ScoutCam Inc. as the legal acquirer
and ScoutCam Ltd. as the accounting acquirer. Under the Recapitalization, the USD amount for shares of common stock is based on the
nominal value and the shares of common stock issued by ScoutCam Inc. (reflecting the legal structure of ScoutCam Inc. as the legal
acquirer) on the Recapitalization Date plus shares of common stock issued by the Company as part of the Recapitalization as described
above. Historical stockholders’ equity reflects the accounting acquirer’s share number and USD amount adjusted for the
exchange ratio determined in the Recapitalization.
|
Private
placement:
|
a.
|
In
December 2019, the Company allocated in a private issuance, a total of 3,413,312 units at a purchase price of USD $0.968 per unit.
Each unit was comprised of two shares of common stock par value US$0.001 per share, one Warrant A (defined below) and two Warrants
B (defined below). The immediate proceeds (gross) from the issuance of the units amounted to approximately USD 3.3 million.
|
Each
Warrant A was exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the 12 month
period following the allocation. Each Warrant B is exercisable into one share of common stock of the Company at an exercise price of
USD 0.893 per share during the 18 month period following the allocation.
In
addition, Shrem Zilberman Group Ltd. (the “Consultant”) will be entitled to receive the amount representing 3% of any exercise
price of each Warrant A or Warrant B that may be exercised in the future. In the event the total proceeds received as a result of exercise
of Warrants will be less than $2 million at the time of their expiration, the Consultant will be required to invest $250,000 in the Company
in return for shares of common stock of Company.
During
2020, 2,992,855 Warrants A were exercised. 420,457 unexercised Warrants A expired on December 30, 2020.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
9 – EQUITY (continued):
|
b.
|
On
March 3, 2020, the Company issued in a private issuance a total of 979,754 units at a purchase price of USD $0.968 per unit.
|
Each
unit was comprised of two shares of common stock par value US$0.001 per share, one Warrant A (defined below) and two Warrants B (defined
below).
Each
Warrant A was exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the 12 month
period following the allocation.
Each
Warrant B is exercisable into one share of common stock of the Company at an exercise price of USD 0.893 per share during the 18 month
period following the allocation.
The
gross proceeds from the issuance of all securities offered amounted to approximately USD 948 thousands. After deducting issuance costs,
the Company received proceeds of approximately USD 909 thousand.
During
2021, 979,784 Warrants A were exercised.
|
c.
|
On
May 18, 2020, the Company allocated in a private issuance a total of 2,066,116 units at a purchase price of USD $0.968 per unit.
|
Each
unit was comprised of two shares of common stock par value US$0.001 per share, one Warrant A (defined below) and two Warrants B (defined
below).
Each
Warrant A is exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the 18 month
period following the allocation.
Each
Warrant B is exercisable into one share of common stock of the Company at an exercise price of USD 0.893 per share during the 24 month
period following the allocation.
The
gross proceeds from the issuance of all securities offered amounted to approximately USD 2 million. After deducting issuance costs, the
Company received proceeds of approximately USD 1.9 million.
During
February 2021, 336,135 Warrants A were exercised.
|
d.
|
On
June 23, 2020, (the “Conversion Date”), the Company entered into and consummated
a Side Letter Agreement with Medigus, whereby the parties agreed to convert, at a conversion
price of $0.484, an outstanding line of credit previously extended by Medigus to the Subsidiary,
which as of the Conversion Date was $381,136, into (a) 787,471 shares of the Company’s
common stock, (b) warrants to purchase 393,736 shares of common stock with an exercise price
of $0.595 (Warrant A), and (c) warrants to purchase 787,471 shares of common stock with an
exercise price of $0.893 (Warrant B). As the conversion price represented the same unit price
as in the March 2020 and May 2020 private placements, no finance expenses have been recorded
in statement of operations as a result of the conversion.
Each
Warrant A is exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the
12 months period following the allocation.
Each
Warrant B is exercisable into one share of common stock of the Company at an exercise price of USD 0.893 per share during the
18 months period following the allocation.
|
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
9 – EQUITY (continued):
As
of December 31, 2020, the Company had the following outstanding warrants to purchase common stock:
Warrant
|
|
Issuance
Date
|
|
Expiration
Date
|
|
Exercise
Price
Per Share ($)
|
|
|
Number
of Shares
of common stock
Underlying
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Medigus
|
|
December 30, 2019
|
|
December 30, 2022
|
|
(*)
|
|
|
2,688,492
|
|
Warrant
B
|
|
December
30, 2019
|
|
June 30,
2021
|
|
|
0.893
|
|
|
|
6,826,623
|
|
Warrant
A
|
|
March 3, 2020
|
|
March 3, 2021
|
|
|
0.595
|
|
|
|
979,754
|
|
Warrant
B
|
|
March 3, 2020
|
|
September 3, 2021
|
|
|
0.893
|
|
|
|
1,959,504
|
|
Warrant
A
|
|
May 18, 2020
|
|
November 18, 2021
|
|
|
0.595
|
|
|
|
2,066,116
|
|
Warrant
B
|
|
May 18 2020
|
|
May 18, 2022
|
|
|
0.893
|
|
|
|
4,132,232
|
|
Warrant
A
|
|
June 23, 2020
|
|
June 23, 2021
|
|
|
0.595
|
|
|
|
393,736
|
|
Warrant
B
|
|
June
23,2020
|
|
December
23, 2021
|
|
|
0.893
|
|
|
|
787,471
|
|
|
|
|
|
|
|
|
|
|
|
|
19,833,928
|
|
(*)
|
If
ScoutCam. 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 2,688,492 shares of the Company’s common stock, which represents 10% of the Company’s
issued and outstanding share capital as of the Exchange Agreement.
|
Stock
based compensation:
2020
Equity Incentive Plan
In
February 2020, the Company’s Board of Directors approved the 2020 Share Incentive Plan (the “Plan”). The Plan initially
included an option pool of 5,228,007 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 576,888 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 3,617,545 shares of common stock.
The
Plan is designed to enable the Company to grant options to purchase ordinary shares 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.
On
February 12, 2020, the Company granted 4,367,515 options pursuant to the Plan. Each option is exercisable into one share of common stock
of the Company of $0.001 par value at the exercise price of $0.29.
On
March 15, 2020, the Company granted 576,888 options pursuant to the Plan to each of the Company’s then serving directors, excluding
Professor Benad Goldwasser. Each option is exercisable into one share of common stock of the Company of $0.001 par value at the exercise
price of $0.29.
On
June 22, 2020, the Company granted 1,544,769 options pursuant to the Plan to Company employees, consultants, directors. Each option is
exercisable into one share of common stock of the Company of $0.001 par value at the exercise price of $0.29.
On
November 11, 2020, the Company granted 144,222 options pursuant to the Plan to Company director. Each option is exercisable into one
share of common stock of the Company of $0.001 par value at the exercise price of $0.35.
Options
granted generally have a contractual term of 7 years and vest over a period of 3 up to 4 years.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
9 – EQUITY (continued):
Stock
Option Activity
The
following summarizes stock option activity:
|
|
Amount
of options
|
|
|
Weighted
average exercise price
|
|
|
Weighted
Average Remaining Contractual Term (years)
|
|
|
Aggregate
Intrinsic Value (in thousands)
|
|
|
|
|
|
|
$
|
|
|
|
|
|
$
in thousands
|
|
Outstanding - December
31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Granted
|
|
|
6,633,394
|
|
|
|
0.29
|
|
|
|
|
|
|
|
|
|
Outstanding
- December 31, 2020
|
|
|
6,633,394
|
|
|
|
0.29
|
|
|
|
6.23
|
|
|
|
2,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Exercisable - December 31, 2020
|
|
|
1,941,701
|
|
|
|
0.29
|
|
|
|
6.12
|
|
|
|
718
|
|
At
December 31, 2020, the aggregate intrinsic value of options granted is calculated as the difference between the exercise price and the
closing price on the same date.
The
Company estimates the fair value of stock option awards on the grant date using the Black-Scholes option pricing model. The weighted-average
grant date fair value per option granted during the years ended December 31, 2020 was $0.27. The fair value of each award is estimated
using Black-Scholes option pricing model based on the following assumptions:
|
|
Year
ended
December
31, 2020
|
|
Underlying
value of ordinary shares ($)
|
|
|
0.446-0.800
|
|
Exercise
price ($)
|
|
|
0.29-0.35
|
|
Expected
volatility (%)
|
|
|
43.35%-45.00
|
%
|
Term
of the options (years)
|
|
|
7
|
|
Risk-free
interest rate (%)
|
|
|
0.54%-1.55
|
%
|
Volatility
is derived from the historical volatility of publicly traded set of peer companies. The risk-free interest rates used in the Black-Scholes
calculations are based on the prevailing U.S. Treasury yield as determined by the U.S. Federal Reserve. The Company has not paid dividends
does not anticipate paying dividends in the foreseeable future. Accordingly, no dividend yield was assumed for purposes of estimating
the fair value of the Company’s share-based compensation. The weighted average expected life of options was estimated individually in
respect of each grant.
The
unrecognized compensation expense calculated under the fair-value method for stock options expected to vest as of December 31, 2020 is
approximately $0.6 million and is expected to be recognized over a weighted-average period of 1.2 years.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
10 - REVENUES:
|
a.
|
Contract
fulfillment assets:
|
The
Company’s contract fulfillment assets as of December 31, 2020:
|
|
December
31,
|
|
|
|
2020
|
|
|
|
USD
in thousands
|
|
Contract
fulfillment assets from contract with Customer B (see note 11b)
|
|
|
1,130
|
|
The
Company’s contract liabilities were as follows:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
USD
in thousands
|
|
The
change in deferred revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
|
502
|
|
|
|
200
|
|
|
|
8
|
|
Deferred
revenue relating to new sales
|
|
|
735
|
|
|
|
387
|
|
|
|
200
|
|
Revenue
recognition during the period
|
|
|
(389
|
)
|
|
|
(85
|
)
|
|
|
(8
|
)
|
Balance
at end of year
|
|
|
848
|
|
|
|
502
|
|
|
|
200
|
|
Contract
liabilities include advance payments, which are primarily related to advanced billings for development services.
Revenue
recognized in 2020 that was included in deferred revenue balance as of December 31, 2019 was USD 389 thousand.
There
was no revenue recognized in 2019 that was included in deferred revenue balance as of December 31, 2018.
Revenue
recognized in 2018 that was included in deferred revenue balance as of January 1, 2018 was USD 8 thousand.
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
10 – REVENUES (continued):
Remaining
Performance Obligations
Remaining
Performance Obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes contract liability
and amounts that will be invoiced and recognized as revenue in future periods. As of December 31, 2020, the total RPO amounted to USD
2.9 million, Which the Company expects to recognize over the expected manufacturing term of the product under development.
NOTE
11 - ENTITY WIDE DISCLOSURES:
ASC
280, “Segment Reporting,” establishes standards for reporting information about operating segments. The Company manages its
business based on one operating segment and derives revenues from sales of products and services developing minimally invasive endosurgical
tools and highly innovative imaging solutions.
|
a.
|
Revenues
by geographical area (based on the location of customers)
|
The
following is a summary of revenues within geographic areas:
|
|
Year
ended on
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
USD
in thousands
|
|
United
States
|
|
|
418
|
|
|
|
142
|
|
|
|
300
|
|
United
Kingdom
|
|
|
41
|
|
|
|
33
|
|
|
|
24
|
|
South
Korea
|
|
|
-
|
|
|
|
-
|
|
|
|
7
|
|
Israel
|
|
|
5
|
|
|
|
67
|
|
|
|
12
|
|
Other
|
|
|
27
|
|
|
|
67
|
|
|
|
48
|
|
|
|
|
491
|
|
|
|
309
|
|
|
|
391
|
|
Set
forth below is a breakdown of Company’s revenue by major customers (major customer –revenues from these customers constituted
at least 10% of total revenues in a certain year):
|
|
Year
ended on
|
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
USD
in thousands
|
|
Customer
A
|
|
|
383
|
|
|
|
85
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
B
|
|
|
-
|
|
|
|
30
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
C
|
|
|
41
|
|
|
|
33
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
D – Parent Company
|
|
|
5
|
|
|
|
36
|
|
|
|
-
|
|
SCOUTCAM
INC. (Formerly known as Intellisense Solutions Inc.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
12 - LEASES
The
Company’s leases relate to vehicles leases and to short term lease of Company’s offices.
The
components of lease expenses during the periods presented were as follows:
|
|
Year
ended
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
USD
in thousands
|
|
Operating
lease expenses
|
|
|
45
|
|
|
|
29
|
|
Short-term
lease expenses
|
|
|
88
|
|
|
|
60
|
|
Total
lease expenses
|
|
|
133
|
|
|
|
89
|
|
Supplemental
cash flow information related to operating leases during the period presented was as follows:
|
|
Year
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
USD
in thousands
|
|
Cash
paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating
cash flows from operating leases
|
|
|
45
|
|
|
|
29
|
|
Lease
term and discount rate related to operating leases as of the period presented were as follows:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
USD
in thousands
|
|
Weighted-average
remaining lease term (in years)
|
|
|
1.85
|
|
|
|
1.4
|
|
Weighted-average
discount rate
|
|
|
10
|
%
|
|
|
10
|
%
|
The
maturities of lease liabilities under operating leases as of December 31, 2020 are as follows:
|
|
USD
in thousands
|
|
2021
|
|
|
63
|
|
2022
|
|
|
47
|
|
2023
|
|
|
8
|
|
Total
undiscounted lease payments
|
|
|
118
|
|
Less:
Imputed interest
|
|
|
(11
|
)
|
Total
lease liabilities
|
|
|
107
|
|
NOTE
13 - SUBSEQUENT EVENTS:
|
a.
|
On
January 20, 2021, the Company’s Board of Directors approved an increase of the authorized share capital of the Company by an
additional 225,000,000 ordinary shares par value $0.001 per share, such that the authorized share capital of the Company following
such increase shall be consisting of 300,000,000 ordinary shares.
|
|
|
|
|
b.
|
Refer
to Note 9b-c regarding exercising of warrants.
|
|
|
|
|
c.
|
On
March 22, 2021, the Company undertook to issue to certain investors (the “Investors”) 22,222,223 units (the “Units”)
in exchange for an aggregate purchase price of $20 million. Each Unit consists of (i) one share of the Company’s common stock
and (ii) one warrant to purchase one share of common stock with an exercise price of US$1.15 per share (the “Warrant”
and the “Exercise Price”). Each Warrant is exercisable until the close of
business on March 31, 2026.
|
|
|
|
|
|
Pursuant
to the terms of the Warrants, following April 1, 2024, if the closing price of the common stock equal or exceeds 135% of the Exercise
Price (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions after
the issue date of the Warrants) for any thirty (30) consecutive trading days, the Company may force the exercise of the Warrants,
in whole or in part, by delivering to the Investors a notice of forced exercise.
|
ScoutCam
INC.
INTERIM
FINANCIAL STATEMENTS
AS
OF MARCH 31, 2021
CONSOLIDATED
SCOUTCAM INC.
SCOUTCAM
INC.
INTERIM
CONDENSED CONSOLIATED BALANCE SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
USD
in thousands
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
12,751
|
|
|
|
3,373
|
|
Accounts receivables
|
|
|
11
|
|
|
|
17
|
|
Receivables on account
of issuance of shares
|
|
|
10,500
|
|
|
|
-
|
|
Inventory
|
|
|
345
|
|
|
|
244
|
|
Receivable from Parent
Company
|
|
|
1
|
|
|
|
47
|
|
Other current assets
|
|
|
453
|
|
|
|
348
|
|
|
|
|
24,061
|
|
|
|
4,029
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Contract fulfillment assets
|
|
|
1,370
|
|
|
|
1,130
|
|
Property and equipment,
net
|
|
|
369
|
|
|
|
269
|
|
Operating lease right-of-use
assets
|
|
|
269
|
|
|
|
107
|
|
Severance pay asset
|
|
|
360
|
|
|
|
360
|
|
|
|
|
2,368
|
|
|
|
1,866
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
26,429
|
|
|
|
5,895
|
|
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
SCOUTCAM
INC.
INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
USD
in thousands
|
|
Liabilities and shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payables
|
|
|
492
|
|
|
|
79
|
|
Contract liabilities
|
|
|
199
|
|
|
|
69
|
|
Operating lease liabilities
- short term
|
|
|
125
|
|
|
|
60
|
|
Accrued compensation expenses
|
|
|
289
|
|
|
|
369
|
|
Accrued issuance expenses
|
|
|
882
|
|
|
|
-
|
|
Other
accrued expenses
|
|
|
317
|
|
|
|
195
|
|
|
|
|
2,304
|
|
|
|
772
|
|
NON-CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Contract liabilities
|
|
|
1,312
|
|
|
|
779
|
|
Operating lease liabilities
- long term
|
|
|
144
|
|
|
|
47
|
|
Liability
for severance pay
|
|
|
333
|
|
|
|
333
|
|
|
|
|
1,789
|
|
|
|
1,159
|
|
TOTAL
LIABILITIES
|
|
|
4,093
|
|
|
|
1,931
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par
value; 300,000,000 and 75,000,000 shares authorized as of March 31, 2021 and December 31, 2020, 60,295,245 and 36,756,983 shares
issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
|
|
|
60
|
|
|
|
37
|
|
Additional paid-in capital
|
|
|
30,189
|
|
|
|
10,234
|
|
Accumulated
deficit
|
|
|
(7,913
|
)
|
|
|
(6,307
|
)
|
TOTAL
SHAREHOLDERS’ EQUITY
|
|
|
22,336
|
|
|
|
3,964
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
26,429
|
|
|
|
5,895
|
|
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
SCOUTCAM
INC.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
Three months
ended
|
|
|
|
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Unaudited
|
|
|
|
USD
in thousands
(except per share data)
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
24
|
|
|
|
40
|
|
Cost of revenues
|
|
|
203
|
|
|
|
130
|
|
Gross Loss
|
|
|
(179
|
)
|
|
|
(90
|
)
|
Research and development expenses
|
|
|
333
|
|
|
|
255
|
|
Sales and marketing expenses
|
|
|
145
|
|
|
|
52
|
|
General and administrative
expenses
|
|
|
933
|
|
|
|
1,112
|
|
Operating loss
|
|
|
(1,590
|
)
|
|
|
(1,509
|
)
|
Financing income (loss),
net
|
|
|
(16
|
)
|
|
|
96
|
|
Net
Loss
|
|
|
(1,606
|
)
|
|
|
(1,413
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per ordinary share (basic and diluted, USD)
|
|
|
(0.04
|
)
|
|
|
(0.05
|
)
|
Weighted
average ordinary shares (basic and diluted, in thousands)
|
|
|
38,000
|
|
|
|
27,488
|
|
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
SCOUTCAM
INC.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Three
Months Ended March 31, 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
|
|
|
36,757
|
|
|
|
37
|
|
|
|
10,234
|
|
|
|
(6,307
|
)
|
|
|
3,964
|
|
Issuance of shares and warrants
|
|
|
22,222
|
|
|
|
22
|
|
|
|
19,096
|
|
|
|
-
|
|
|
|
19,118
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
79
|
|
|
|
-
|
|
|
|
79
|
|
Exercise of warrants
|
|
|
1,316
|
|
|
|
1
|
|
|
|
780
|
|
|
|
-
|
|
|
|
781
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,606
|
)
|
|
|
(1,606
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31,
2021
|
|
|
60,295
|
|
|
|
60
|
|
|
|
30,189
|
|
|
|
(7,913
|
)
|
|
|
22,336
|
|
Three
Months Ended March 31, 2020 (Unaudited)
|
|
Ordinary
shares
|
|
|
Additional
paid-in
|
|
|
Accumulated
|
|
|
Total
Shareholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
equity
|
|
|
|
In
thousands
|
|
|
USD
in thousands
|
|
Balance at January 1, 2020
|
|
|
26,885
|
|
|
|
27
|
|
|
|
4,135
|
|
|
|
(1,640
|
)
|
|
|
2,522
|
|
Issuance of shares and warrants
|
|
|
1,960
|
|
|
|
2
|
|
|
|
907
|
|
|
|
-
|
|
|
|
909
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
701
|
|
|
|
-
|
|
|
|
701
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,413
|
)
|
|
|
(1,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31,
2020
|
|
|
28,845
|
|
|
|
29
|
|
|
|
5,743
|
|
|
|
(3,053
|
)
|
|
|
2,719
|
|
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
SCOUTCAM
INC.
INTERIM
CONDENSED CONOLIDATED STATEMENTS OF CASH FLOWS
|
|
Three months
ended
|
|
|
|
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Unaudited
|
|
|
|
USD
in thousands
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,606
|
)
|
|
|
(1,413
|
)
|
Adjustments to reconcile
net loss to net cash used in operations:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
17
|
|
|
|
11
|
|
Other non-cash items
|
|
|
-
|
|
|
|
39
|
|
Share based compensation
|
|
|
79
|
|
|
|
682
|
|
Loss (profit) from exchange differences on
cash and cash equivalents
|
|
|
12
|
|
|
|
(96
|
)
|
|
|
|
|
|
|
|
|
|
CHANGES IN OPERATING ASSET
AND LIABILITY ITEMS:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
6
|
|
|
|
10
|
|
Inventory
|
|
|
(101
|
)
|
|
|
(125
|
)
|
Other current assets
|
|
|
(105
|
)
|
|
|
(53
|
)
|
Accounts payables
|
|
|
413
|
|
|
|
5
|
|
Parent company
|
|
|
46
|
|
|
|
(16
|
)
|
Contract fulfilment assets
|
|
|
(240
|
)
|
|
|
-
|
|
Contract liabilities
|
|
|
663
|
|
|
|
44
|
|
Accrued compensation expenses
|
|
|
(80
|
)
|
|
|
(24
|
)
|
Other accrued expenses
|
|
|
122
|
|
|
|
(201
|
)
|
Net cash flows used
in operating activities
|
|
|
(774
|
)
|
|
|
(1,137
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(117
|
)
|
|
|
(185
|
)
|
Net cash flows used
in investing activities
|
|
|
(117
|
)
|
|
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Loan repayment to Parent company
|
|
|
-
|
|
|
|
(81
|
)
|
Proceeds from exercise of warrants
|
|
|
781
|
|
|
|
-
|
|
Proceeds from issuance
of shares and warrants
|
|
|
9,500
|
|
|
|
909
|
|
Net cash flows provided
by financing activities
|
|
|
10,281
|
|
|
|
828
|
|
|
|
|
|
|
|
|
|
|
PROFIT (LOSS) FROM EXCHANGE
DIFFERENCES ON CASH AND CASH EQUIVALENTS
|
|
|
(12
|
)
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
|
|
|
9,378
|
|
|
|
(398
|
)
|
BALANCE
OF CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
|
|
|
3,373
|
|
|
|
3,245
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
|
|
|
12,751
|
|
|
|
2,847
|
|
SUPPLEMENTAL
INFORMATION FOR CASH FLOW:
Non
cash activities -
|
|
Three
months ended
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
USD
in thousands
|
|
Loan from Parent Company settled
against receivable from Parent Company
|
|
|
-
|
|
|
|
41
|
|
The
accompanying notes are an integral part of these interim condensed consolidated financial statements.
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – GENERAL:
|
a.
|
ScoutCam
Inc. (the “Company”), formally known as Intellisense Solutions Inc., was incorporated
under the laws of the State of Nevada on March 22, 2013. The Company was initially engaged
in the business of developing web portals to allow companies and individuals to engage in
the purchase and sale of vegetarian food products over the Internet. The Company was unable
to execute it original business plan, develop significant operations or achieve commercial
sales. Prior to the closing of the Securities Exchange Agreement (as defined below), the
Company was a “shell company”.
ScoutCam
Ltd., or ScoutCam, was formed in the State of Israel on January 3, 2019 as a wholly-owned subsidiary of Medigus Ltd. (the “Parent
Company”, “Medigus”), an Israeli company traded on the Nasdaq Capital Market, and commenced operations on March
1, 2019. Upon incorporation, ScoutCam issued to Medigus 1,000,000 Ordinary shares with no par value. On March 2019, ScoutCam issued
to Medigus an additional 1,000,000 Ordinary shares with no par value.
ScoutCam
was incorporated as part of a reorganization of Medigus, which was designed to distinguish ScoutCam’s miniaturized imaging
business, or the micro ScoutCam™ 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. In December 2019, Medigus and ScoutCam consummated
a certain Amended and Restated Asset Transfer Agreement, under which Medigus transferred and assigned certain assets and intellectual
property rights related to its miniaturized imaging business to ScoutCam.
On
September 16, 2019, Intellisense entered into a Securities Exchange Agreement (the “Exchange Agreement”), with Medigus,
pursuant to which Medigus assigned, transferred and delivered 100% of its holdings in ScoutCam to Intellisense, in exchange for consideration
consisting of shares of Intellisense’s common stock representing 60% of the issued and outstanding share capital of Intellisense
immediately upon the closing of the Exchange Agreement (the “Closing”). The Closing occurred on December 30, 2019 (the
“Closing Date”).
Although
the transaction resulted in ScoutCam becoming a wholly owned subsidiary of Intellisense, the transaction constituted a reverse recapitalization
since Medigus, the only shareholder of ScoutCam prior to the Exchange Agreement, was issued a substantial majority of the outstanding
capital stock of Intellisense upon consummation of the Exchange Agreement, and also taking into account that prior to the Closing
Date, Intellisense was considered as a shell corporation. Accordingly, ScoutCam is considered the accounting acquirer of the merged
company.
“Group”
- the Company together with ScoutCam.
ScoutCam
has developed a range of micro CMOS (complementary metal-oxide semiconductor) and CCD (charge-coupled device) video cameras, including
micro ScoutCam™ 1.2. These innovative cameras are suitable for both medical and industrial applications. Based on its proprietary
technology, the Company designs and manufactures endoscopy and micro camera systems for partner companies.
|
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – GENERAL (continued):
|
b.
|
Since
incorporation through March 31, 2021, the Group has an accumulated deficit of approximately
$7.9 million and its activities have been funded mainly by its shareholders. The Group’s
cash and cash equivalents as of March 31, 2021, as well as its proceeds from issuance of
common stock and warrants in the private offering as detailed in Note 4, will allow the Group
to fund its operating plan through at least the next 12 months. However, the Group expects
to continue to incur significant research and development and other costs related to its
ongoing operations and in order to continue its future operations, the Group will need to
obtain additional funding until becoming profitable.
|
|
|
|
|
c.
|
In
early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This
pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Group considered
the impact of COVID-19 on its operations and determined that there were no material adverse impacts on the Group’s results
of operations and financial position as of March 31, 2021. 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, 2020.
|
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.
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.
|
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.
|
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.
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 – LEASES:
On
January 1, 2019, the Group adopted ASU 2016-02 using the modified retrospective approach for all lease arrangements at the beginning
period of adoption. ScoutCam leases office and vehicles under operating leases. On March 31, 2021, the Group’s ROU assets and lease
liabilities for operating leases totaled $269 thousand.
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. ScoutCam holds the right to terminate the lease agreement after 24 months. Monthly lease payments under the agreement
are approximately $8 thousand. Lease expenses recorded in the interim consolidated statements of operations were $24 thousand for the
three months ended March 31, 2021.
Supplemental
cash flow information related to operating leases was as follows:
|
|
Three
months ended
March
31, 2021
|
|
|
|
USD
in thousands
|
|
Cash payments
for operating leases
|
|
|
24
|
|
Total lease expenses
|
|
|
24
|
|
As
of March 31, 2021, the Company’s operating leases had a weighted average remaining lease term of 1.75 years and a weighted average
discount rate of 10%. Future lease payments under operating leases as of March 31, 2021 were as follows:
|
|
Operating
leases
|
|
|
|
USD
in thousands
|
|
Remainder of 2021
|
|
|
99
|
|
2022
|
|
|
117
|
|
2023
|
|
|
86
|
|
Total future lease payments
|
|
|
302
|
|
Less imputed interest
|
|
|
(33
|
)
|
Total lease liability
balance
|
|
|
269
|
|
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
4 – EQUITY:
Private
placement:
|
a.
|
In
December 2019, the Company allocated in a private issuance, a total of 3,413,312 units at a purchase price of USD $0.968 per unit.
Each unit was comprised of two shares of common stock par value US$0.001 per share, one Warrant A (defined below) and two Warrants
B (defined below). The immediate proceeds (gross) from the issuance of the units amounted to approximately USD 3.3 million.
|
Each
Warrant A was exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the 12 month
period following the allocation. Each Warrant B is exercisable into one share of common stock of the Company at an exercise price of
USD 0.893 per share during the 18 month period following the allocation.
In
addition, Shrem Zilberman Group Ltd. (the “Consultant”) will be entitled to receive the amount representing 3% of any exercise
price of each Warrant A or Warrant B that may be exercised in the future. In the event the total proceeds received as a result of exercise
of Warrants will be less than $2 million at the time of their expiration, the Consultant will be required to invest $250,000 in the Company
in return for shares of common stock of Company.
During
2020, 2,992,855 Warrants A were exercised. 420,457 unexercised Warrants A expired on December 30, 2020.
|
b.
|
On
March 3, 2020, the Company issued in a private issuance a total of 979,754 units at a purchase price of USD $0.968 per unit.
|
Each
unit was comprised of two shares of common stock par value US$0.001 per share, one Warrant A (defined below) and two Warrants B (defined
below).
Each
Warrant A was exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the 12 month
period following the allocation.
Each
Warrant B is exercisable into one share of common stock of the Company at an exercise price of USD 0.893 per share during the 18 month
period following the allocation.
The
gross proceeds from the issuance of all securities offered amounted to approximately USD 948 thousands. After deducting issuance costs,
the Company received proceeds of approximately USD 909 thousand.
During
2021, all Warrants A were exercised.
|
c.
|
On
May 18, 2020, the Company allocated in a private issuance a total of 2,066,116 units at a purchase price of USD $0.968 per unit.
|
Each
unit was comprised of two shares of common stock par value US$0.001 per share, one Warrant A (defined below) and two Warrants B (defined
below).
Each
Warrant A is exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the 18 month
period following the allocation.
Each
Warrant B is exercisable into one share of common stock of the Company at an exercise price of USD 0.893 per share during the 24 month
period following the allocation.
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
gross proceeds from the issuance of all securities offered amounted to approximately USD 2 million. After deducting issuance costs, the
Company received proceeds of approximately USD 1.9 million.
During
February 2021, 336,135 Warrants A were exercised.
|
d.
|
On
June 23, 2020, (the “Conversion Date”), the Company entered into and consummated
a Side Letter Agreement with Medigus, whereby the parties agreed to convert, at a conversion
price of $0.484, an outstanding line of credit previously extended by Medigus to the Subsidiary,
which as of the Conversion Date was $381,136, into (a) 787,471 shares of the Company’s
common stock, (b) warrants to purchase 393,736 shares of common stock with an exercise price
of $0.595 (Warrant A), and (c) warrants to purchase 787,471 shares of common stock with an
exercise price of $0.893 (Warrant B). As the conversion price represented the same unit price
as in the March 2020 and May 2020 private placements, no finance expenses have been recorded
in statement of operations as a result of the conversion.
Each
Warrant A is exercisable into one share of common stock of the Company at an exercise price of USD 0.595 per share during the 12
months period following the allocation.
Each
Warrant B is exercisable into one share of common stock of the Company at an exercise price of USD 0.893 per share during the 18
months period following the allocation.
|
|
e.
|
On
March 22, 2021, the Company undertook to issue to certain investors (the “Investors”)
22,222,223 units (the “Units”) in exchange for an aggregate purchase price of
$20 million. Each Unit consists of (i) one share of the Company’s common stock and
(ii) one warrant to purchase one share of common stock with an exercise price of US$1.15
per share (the “Warrant” and the “Exercise Price”). Each Warrant
is exercisable until the close of business on
March 31, 2026.
Pursuant
to the terms of the Warrants, following April 1, 2024, if the closing price of the common stock equal or exceeds 135% of the Exercise
Price (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions after
the issue date of the Warrants) for any thirty (30) consecutive trading days, the Company may force the exercise of the Warrants,
in whole or in part, by delivering to the Investors a notice of forced exercise.
|
As
of March 31, 2021, the Company had the following outstanding warrants to purchase common stock:
Warrant
|
|
Issuance
Date
|
|
Expiration
Date
|
|
Exercise
Price
Per Share ($)
|
|
|
Number
of
Shares
of
common stock
Underlying
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Medigus Warrant
|
|
December 30, 2019
|
|
December 30, 2022
|
|
|
(*
|
)
|
|
|
2,688,492
|
|
Warrant B
|
|
December 30, 2019
|
|
June 30, 2021
|
|
|
0.893
|
|
|
|
6,826,623
|
|
Warrant B
|
|
March 3, 2020
|
|
September 3, 2021
|
|
|
0.893
|
|
|
|
1,959,504
|
|
Warrant A
|
|
May 18, 2020
|
|
November 18, 2021
|
|
|
0.595
|
|
|
|
1,729,981
|
|
Warrant B
|
|
May 18 2020
|
|
May 18, 2022
|
|
|
0.893
|
|
|
|
4,132,232
|
|
Warrant A
|
|
June 23, 2020
|
|
June 23, 2021
|
|
|
0.595
|
|
|
|
393,736
|
|
Warrant B
|
|
June 23,2020
|
|
December 23, 2021
|
|
|
0.893
|
|
|
|
787,471
|
|
Warrant March 2021,
|
|
March 29,2021
|
|
March 31, 2026
|
|
|
1.150
|
|
|
|
22,222,223
|
|
|
|
|
|
|
|
|
|
|
|
|
40,740,262
|
|
(*)
|
If
ScoutCam achieves an aggregate amount of $33 million in sales within the first three years immediately after the Exchange Agreement,
the Company will issue to Medigus 2,688,492 shares of the Company’s common stock, which represents 10% of the Company’s
issued and outstanding share capital as of the Exchange Agreement.
|
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
4 – EQUITY (continued):
Share-based
compensation to employees and to directors:
In
February 2020, the Company’s Board of Directors approved the 2020 Share Incentive Plan (the “Plan”). The Plan initially
included a pool of 5,228,007 shares of common stock for grant to Company employees, consultants, directors and other service providers.
On March 15, 2020, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the Plan
by an additional 576,888 shares of Common Stock. On June 22, 2020, the Company’s Board of Directors approved an increase to the
Company’s option pool pursuant to the Plan by an additional 3,617,545 shares of common stock.
The
Plan is designed to enable the Company to grant options to purchase ordinary shares and RSUs under various and different tax regimes
including, without limitation: (i) pursuant and subject to Section 102 of the Israeli Tax Ordinance or any provision which may amend
or replace it and any regulations, rules, orders or procedures promulgated thereunder and to designate them as either grants made through
a trustee or not through a trustee; and (ii) pursuant and subject to Section 3(i) of the Israeli Tax Ordinance.
During
the three months ended March 31, 2021, the Company granted 511,792 options pursuant to the Plan.
The
fair value of each option was estimated as of the date of grant or reporting period using the Black-Scholes option-pricing model, using
the following assumptions:
|
|
Three
months
ended
March 31,
2021
|
|
Underlying value of ordinary shares ($)
|
|
|
0.85-0.90
|
|
Exercise price ($)
|
|
|
0.40-0.80
|
|
Expected volatility (%)
|
|
|
47.44
|
%
|
Term of the options (years)
|
|
|
7
|
|
Risk-free interest rate
|
|
|
0.78%-0.94
|
%
|
The
cost of the benefit embodied in the options granted during the three months ended March 31, 2021, based on their fair value as at the
grant date, is estimated to be approximately $289 thousands. These amounts will be recognized in statements of operations over the vesting
period.
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
4 – EQUITY (continued):
The
following table summarizes stock option activity for the three months ended March 31, 2021:
|
|
For
the
Three
months ended
March
31, 2021
|
|
|
|
Amount
of
options
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
$
|
|
Outstanding at beginning of period
|
|
|
6,633,394
|
|
|
|
0.29
|
|
Granted
|
|
|
511,792
|
|
|
|
0.51
|
|
Cancelled
|
|
|
(791,401
|
)
|
|
|
0.29
|
|
Outstanding at end of period
|
|
|
6,353,785
|
|
|
|
0.31
|
|
|
|
|
|
|
|
|
|
|
Vested at end of period
|
|
|
2,267,216
|
|
|
|
0.29
|
|
The
following table sets forth the total share-based payment expenses resulting from options granted, included in the statements of operation:
|
|
Three
months
ended
March
31, 2021
|
|
|
|
USD
in thousands
|
|
Research and development
|
|
|
56
|
|
General and administrative
|
|
|
23
|
|
Total expenses
|
|
|
79
|
|
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5 – REVENUES:
Contract
fulfillment assets and Contract liabilities:
The
Company’s contract fulfillment assets and contract liabilities as of March 31, 2021 and December 31, 2020 were as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
USD
in thousands
|
|
Contract fulfillment assets
|
|
|
1,370
|
|
|
|
1,130
|
|
Contract liabilities
|
|
|
1,511
|
|
|
|
848
|
|
Contract
liabilities include advance payments, which are primarily related to advanced billings for development services.
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 invoiced and recognized as revenue in future periods. As of March 31, 2021, the total RPO amounted to $2.9 million,
which t the Company expects to recognize over the expected manufacturing term of the product under development.
NOTE
6 – INVENTORY:
Composed
as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
USD
in thousands
|
|
Raw materials and supplies
|
|
|
145
|
|
|
|
45
|
|
Finished goods
|
|
|
279
|
|
|
|
278
|
|
Inventory write downs
|
|
|
(79
|
)
|
|
|
(79
|
)
|
|
|
|
345
|
|
|
|
244
|
|
During
the period ended March 31, 2021, no impairment occurred.
SCOUTCAM
INC.
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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
On
May 30, 2019, ScoutCam Ltd. entered into an intercompany agreement with Medigus (the “Intercompany Agreement”) according
to which ScoutCam Ltd. agreed to hire and retain certain services from Medigus. The agreed upon services provided under the Intercompany
Agreement included: (1) lease of office space and clean room based on actual space utilized by ScoutCam Ltd. and in shared spaces according
to employee ratio; (2) utilities such as electricity water, IT and communication services based on employee ratio; (3) car services,
including car rental, gas usage, payment for toll roads based on 100% of expense incurred from a ScoutCam Ltd. employee car; (4) external
accountant services at a price of USD 6,000 per annum; (5) directors and officers insurance at a sum of 1/3 of Parent company cost; (6)
CFO services at a sum of 50% of Parent company CFO employer cost; (7) every direct expense of ScoutCam Ltd. that is paid by the Parent
company in its entirety subject to approval of such direct expenses in advance; and (8) any other mutual expense that is borne by the
parties according to the Respective portion of the Mutual Expense
In
addition, ScoutCam Ltd.’s employees provide support services to Medigus.
On
April 20, 2020, ScoutCam Ltd. entered into an amended and restated intercompany services agreement with Medigus.
Balances
with related parties:
|
|
March
31, 2021
|
|
|
December
31, 2020
|
|
|
|
|
|
|
|
|
Receivable from Parent Company
|
|
|
1
|
|
|
|
47
|
|
Shares
of Common Stock
SCOUTCAM
INC.
,
2021
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth all costs and expenses, other than underwriting discounts and commissions, paid or payable by the Registrant
in connection with the sale of the shares of Common Stock being registered hereby. All amounts shown are estimates except for the SEC
registration fee.
SEC registration
fee
|
|
$
|
|
|
Legal fees and expenses
|
|
$
|
|
|
Accounting fees and expenses
|
|
$
|
|
|
Miscellaneous fees and
expenses
|
|
$
|
|
|
Total
|
|
$
|
|
|
Item
14. Indemnification of Directors and Officers.
Nevada
law and certain provisions of our bylaws under certain circumstances provide for indemnification of our officers, directors and controlling
persons against liabilities, which they may incur in such capacities. A summary of the circumstances in which such indemnification is
provided for is contained herein, but this description is qualified in its entirety by reference to our bylaws and to the statutory provisions.
In
general, any officer, director, employee or agent may be indemnified against expenses, fines, settlements or judgments arising in connection
with a legal proceeding to which such person is a party, if that person’s actions were in good faith, were believed to be in our
best interest, and were not unlawful. Unless such person is successful upon the merits in such an action, indemnification may be awarded
only after a determination by independent decision of our board of directors, by legal counsel, or by a vote of the stockholders, that
the applicable standard of conduct was met by the person to be indemnified.
The
circumstances under which indemnification is granted in connection with an action brought on our behalf are generally the same as those
set forth above; however, with respect to such actions, indemnification is granted only with respect to expenses actually incurred in
connection with the defense or settlement of the action. In such actions, the person to be indemnified must have acted in good faith
and in a manner believed to have been in our best interest, and have not been adjudged liable for negligence or misconduct.
Indemnification
may also be granted pursuant to the terms of agreements which may be entered into in the future or pursuant to a vote of stockholders
or directors. The statutory provision cited above also grants the power to us to purchase and maintain insurance which protects our officers
and directors against any liabilities incurred in connection with their service in such a position, and such a policy may be obtained
by us.
A
stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors
and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any
of our directors, officers or employees regarding which indemnification is sought, nor are we aware of any threatened litigation that
may result in claims for indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, this indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
Item
15. Recent Sales of Unregistered Securities.
Set
forth below are the sales of all securities by the Company since June 2018, which were not registered under the Securities Act. The Company
believes that each of such issuances was exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities
Act, Rule 701 and/or Regulation S under the Securities Act.
On
December 30, 2019, the Company issued 16,130,952 shares of Common Stock to Medigus in consideration for 100% of its holdings in ScoutCam
Ltd.
Also
on December 30, 2019, pursuant to a certain purchase agreement with investors, the Company issued 6,826,623 shares of Common Stock to
such investors in exchange for consideration of an aggregate purchase price of approximately US$3.3 million. The Company also issued
to the foregoing investors a total of 10,239,935 warrants to purchase Common Stock, whereby (i) 3,413,312 of such warrants are for the
purchase of one share of Common Stock with an exercise price of $0.595, and (ii) 6,826,623 of such warrants are for the purchase of one
share of Common Stock with an exercise price of $0.893.
On
March 3, 2020, the Company consummated a securities purchase agreement (the “Purchase Agreement”) with certain investors
in connection with the sale and issuance of $948,400 worth of units. Each unit consisted of: (i) two shares of Common Stock and (ii)
(a) one warrant to purchase one share of Common Stock with an exercise price of $0.595 (“Warrant A”) and (b) two warrants
to purchase each one share of Common Stock with an exercise price of $0.893 (“Warrant B”, and together with Warrant A, the
“Warrants”), at a purchase price of $0.968 per unit. In connection with the purchase agreement, the Company issued to foregoing
investors 1,959,504 shares of Common Stock, 979,754 Warrants A to purchase shares of Common Stock and 1,959,504 Warrants B to purchase
shares of Common Stock.
On
May 18, 2020, the Company entered into and consummated a securities purchase agreement with M. Arkin (1999) Ltd. (“Arkin Ltd.”)
in connection with the sale and issuance of 2,066,116 units (“Arkin Units”), at a purchase price of $0.968 per Arkin Unit,
and for an aggregate purchase price of $2,000,000 (the “Arkin Transaction”). Each Arkin Unit consists of: (i) two shares
of Common Stock and (ii) (a) one warrant to purchase one share of Common Stock with an exercise price of $0.595 (“Arkin Warrant
A”) and (b) two warrants, each to purchase one share of Common Stock with an exercise price of $0.893.
On
June 23, 2020, the Company and Medigus agreed to convert, at a conversion price of $0.484, an outstanding line of credit previously extended
by Medigus to the Company, which as of June 23, 2020, was $381,136 into (a) 787,471 shares of Common Stock, (b) warrants to purchase
393,736 shares of Common Stock with an exercise price of $0.595, and (c) warrants to purchase 787,471 shares of Common Stock with an
exercise price of $0.893.
On
March 22, 2021, the Company undertook to issue to certain investors 22,222,223 units in exchange for an aggregate purchase price of $20
million. Each such unit consisted of (i) one share of the Company’s Common Stock and (ii) one warrant to purchase one share of
Common Stock with an exercise price of $1.15 per share (the “Warrant” and the “Exercise Price”). Each Warrant
is exercisable until the close of business on March 31, 2026. Pursuant to the terms of the
Warrants, following April 1, 2024, if the closing price of the Common Stock equal or exceeds 135% of the Exercise Price (subject to appropriate
adjustments for stock splits, stock dividends, stock combinations and other similar transactions after the issue date of the Warrants)
for any thirty (30) consecutive trading days, the Company may force the exercise of the Warrants, in whole or in part, by delivering
to these investors a notice of forced exercise.
Item
16. Exhibits and Financial Statement Schedules.
(a)
Exhibits.
3.2.2*
|
|
Form
of Amended and Restated Bylaws
|
4.1
|
|
Description of the Registrant’s Securities (incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K filed with the SEC on March 16, 2020)
|
5.1*
|
|
Opinion
of McDonald Carano LLP (including consent)
|
10.1
|
|
Securities Exchange Agreement, dated September 16, 2019, by and between our Company and Medigus Ltd. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on September 17, 2019)
|
10.2
|
|
Form of Securities Purchase Agreement, dated December 26, 2019, by and between our Company, ScoutCam Ltd., and certain investors listed therein (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)
|
10.3
|
|
Form of Escrow Agreement, dated December 26, 2019, by and between our Company, ScoutCam Ltd., Altshuler Shaham Trusts Ltd., and those certain investors that are a party to the Securities Purchase Agreement dated December 26, 2019 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)
|
10.4
|
|
Form of Warrant A by and between our Company and those certain investors that are a party to the Securities Purchase Agreement dated December 30, 2019 (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)
|
10.5
|
|
Form of Warrant B by and between our Company and those certain investors that are a party to the Securities Purchase Agreement dated December 30, 2019 (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)
|
10.6
|
|
Form of Registration Rights Agreement, dated December 26, 2019, by and between our Company and those certain investors that are a party to the Securities Purchase Agreement dated December 26, 2019 (incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)
|
10.7
|
|
Amended and Restated Asset Transfer Agreement, by and between ScoutCam Ltd. and Medigus Ltd., dated December 1, 2019 (incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)
|
10.8+
|
|
Consulting Agreement by and between ScoutCam Ltd. and Prof. Benad Goldwasser, dated July 31, 2019 (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)
|
10.9
|
|
Consulting Agreement by and between ScoutCam Ltd. and Shrem Zilberman Group Ltd., dated December 10, 2019 (incorporated by reference to Exhibit 10.9 to our Annual Report on Form 10-K filed with the SEC on March 16, 2020)
|
10.10
|
|
2020 Share Incentive Plan (incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K filed with the SEC on March 16, 2020)
|
10.11
|
|
Form of Notice of Option Grant and Option Agreement (incorporated by reference to Exhibit 10.11 to our Annual Report on Form 10-K filed with the SEC on March 16, 2020)
|
10.12
|
|
Form of Securities Purchase Agreement, dated March 3, 2020, by and among ScoutCam Inc. and certain investors listed therein (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 5, 2020)
|
10.13
|
|
Form of Registration Rights Agreement, dated March 3, 2020, by and among ScoutCam Inc. and those certain investors that are a party to the Securities Purchase Agreement dated March 3, 2020 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on March 5, 2020)
|
10.14
|
|
Form of Warrant A, by and among ScoutCam Inc. and those certain investors that are a party to the Securities Purchase Agreement dated March 3, 2020 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on March 5, 2020)
|
10.15
|
|
Form of Warrant B, by and among ScoutCam Inc. and those certain investors that are a party to the Securities Purchase Agreement dated March 3, 2020 (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on March 5, 2020)
|
10.16
|
|
Intercompany Services Agreement, by and between Medigus Ltd. and ScoutCam Ltd., dated May 30, 2019 (incorporated by reference to Exhibit 10.16 to our Form S-1 filed with the SEC on May 12, 2020)
|
10.17
|
|
Amended and Restated Intercompany Services Agreement, by and between Medigus Ltd. and ScoutCam Ltd., dated April 20, 2020 (incorporated by reference to Exhibit 10.17 to our Form S-1 filed with the SEC on May 12, 2020)
|
10.18
|
|
Patent License Agreement, by and between Medigus Ltd. and ScoutCam Ltd., dated December 1, 2019*** (incorporated by reference to Exhibit 10.18 to our Form S-1 filed with the SEC on May 12, 2020)
|
10.19+
|
|
Employment Agreement, by and between ScoutCam Ltd. and Yaron Silberman, dated February 28, 2019 (incorporated by reference to Exhibit 10.19 to our Form S-1 filed with the SEC on May 12, 2020)
|
10.20+
|
|
Employment Agreement, by and between ScoutCam Ltd. and Amir Govrin, dated May 1, 2019 (incorporated by reference to Exhibit 10.20 to our Form S-1 filed with the SEC on May 12, 2020)
|
10.21+
|
|
Employment Agreement, by and between ScoutCam Ltd. and Tanya Yosef, dated January 14, 2021 (incorporated by reference to Exhibit 10.21 to our Annual Report on Form 10-K filed with the SEC on March 31, 2021)
|
10.22+
|
|
Employment Agreement, by and between ScoutCam Ltd. and Katrin Dlugach, dated July 1, 2019 (incorporated by reference to Exhibit 10.22 to our Annual Report on Form 10-K filed with the SEC on March 31, 2021)
|
10.23
|
|
Securities Purchase Agreement, dated May 18, 2020, by and between ScoutCam Inc. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)
|
10.24
|
|
Registration Rights Agreement, dated May 18, 2020, by and between ScoutCam Inc. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)
|
10.25
|
|
Voting Agreement, dated May 18, 2020, by and among ScoutCam Inc. Medigus Ltd. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)
|
10.26
|
|
Letter Agreement, dated May 18, 2020, by and among ScoutCam Inc., ScoutCam Ltd., Medigus Ltd. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)
|
10.27
|
|
Form of Warrant A by and between ScoutCam Inc. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)
|
10.28
|
|
Form of Warrant B by and between ScoutCam Inc. and M. Arkin (1999) Ltd. (incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)
|
10.29
|
|
Side Letter Agreement, dated June 23, 2020, by and between ScoutCam Inc. and Medigus Ltd. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on June 24, 2020)
|
10.30
|
|
Form of Warrant A by and between ScoutCam Inc. and Medigus Ltd. (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on June 24, 2020)
|
10.31
|
|
Form of Warrant B by and between ScoutCam Inc. and Medigus Ltd. (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on June 24, 2020)
|
10.32
|
|
Form of Amendment to Warrant to Purchase Shares of Common Stock (incorporated by reference to Exhibit 10.32 to our Annual Report on Form 10-K filed with the SEC on March 31, 2021)
|
10.33+
|
|
Employment Agreement, by and between Yovav Sameah and ScoutCam Ltd. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 8, 2021)
|
10.34
|
|
Purchase Order Form, between ScoutCam Inc. and the Investors in the March 2021 Private Placement (incorporated by reference to Exhibit 10.34 to our Registration Statement on Form S-1 filed with the SEC on May 4, 2021)
|
10.35
|
|
Form of Warrant (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the SEC on March 24, 2021)
|
21.1
|
|
Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)
|
23.1**
|
|
Consent of Kesselman & Kesselman, Certified Public Accountants (Isr.), a member of PricewaterhouseCoopers International Limited
|
23.2**
|
|
Consent Brightman Almagor Zohar & Co., a firm in the Deloitte global network, an independent registered public accounting firm
|
23.3*
|
|
Consent
of McDonald Carano LLP (included in Exhibit 5.1)
|
24.1**
|
|
Power
of Attorney
|
101.INS
|
|
XBRL
Instance Document
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
*
|
To
be filed by amendment
|
**
|
Filed
herewith
|
***
|
Certain
confidential information contained in this exhibit, marked by brackets, was omitted because it is both (i) not material and (ii)
would likely cause competitive harm to the Company if publicly disclosed. “[***]” indicates where the information has
been omitted from this exhibit
|
+
|
Management
contract or compensatory plan or arrangement
|
(b)
|
Financial
Statement Schedules. Schedules have been omitted because the information required to be set out therein is not applicable or is shown
in the financial statements or notes thereto.
|
Item
17. Undertakings.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The
undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s
annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2)
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time
it was declared effective.
(3)
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Omer, State of Israel, on June 28, 2021.
|
SCOUTCAM
INC.
|
|
|
|
By:
|
/s/
Yovav Sameah
|
|
Name:
|
Yovav
Sameah
|
|
Title:
|
Chief
Executive Officer
|
POWER
OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Yovav Sameah and Tanya
Yosef as his or her true and lawful attorney-in-fact and agent, with full powers of substitution and re-substitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any and all additional registration statements pursuant to Rule 462(b) of the Securities Act of 1933,
and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or either of them or their or his or her substitute or substitutes, may lawfully do or cause
to be done by virtue thereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities
and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Yovav Sameah
|
|
Chief
Executive Officer
|
|
June
28, 2021
|
Yovav
Sameah
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/
Tanya Yosef
|
|
Chief
Financial Officer
|
|
June
28, 2021
|
Tanya
Yosef
|
|
(Principal
Financial Officer)
|
|
|
|
|
|
|
|
/s/
Benad Goldwasser
|
|
Chairman
of the Board
|
|
June
28, 2021
|
Benad
Goldwasser
|
|
|
|
|
|
|
|
|
|
/s/
Shmuel Donnerstein
|
|
Director
|
|
June
28, 2021
|
Shmuel
Donnerstein
|
|
|
|
|
|
|
|
|
|
/s/
Ronen Rosenbloom
|
|
Director
|
|
June
28, 2021
|
Ronen
Rosenbloom
|
|
|
|
|
|
|
|
|
|
/s/
Issac Zilberman
|
|
Director
|
|
June
28, 2021
|
Issac
Zilberman
|
|
|
|
|
|
|
|
|
|
/s/
Lior Amit
|
|
Director
|
|
June
28, 2021
|
Lior
Amit
|
|
|
|
|
|
|
|
|
|
/s/
Moshe (Mori) Arkin
|
|
Director
|
|
June
28, 2021
|
Moshe
(Mori) Arkin
|
|
|
|
|
|
|
|
|
|
/s/
Inbal Kreiss
|
|
Director
|
|
June
28, 2021
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Inbal
Kreiss
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/s/
Zeev Vurembrand
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Director
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June
28, 2021
|
Zeev
Vurembrand
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