Readers are advised to review the following discussion and analysis of our
financial condition and results of operations together with our consolidated
financial statements and related notes thereto included elsewhere in this
Quarterly Report on Form 10-Q and the consolidated financial statements and
related notes thereto in our Annual Report on Form 10-K for the year ended
Overview Overview
The Company's primary business activities during last few months were:
? Production and supply of product to a Fortune 500 multinational healthcare corporation. ? Enlarging our focus on R&D activities in the domain of I4.0 (including PdM and CBM in sectors such as aerospace, maritime energy and other heavy machinery, engines and complicated mechanics which have a need for monitoring and predictive maintenance applications). The main effect of this activity was an increase in the number of employees to enable the Company to manage the anticipated increased workload and solution development.
Comparison of the three months ended
The following table summarizes our results of operations for the three month
period ended
2023 2022 % Change Revenues 303,000 2,000 15,050 % Cost of Revenues 550,000 288,000 91 % Gross Loss (247,000 ) (286,000 ) (14 )% Research and development expenses 1,398,000 954,000 47 % Sales and marketing expense 176,000 243,000 (28 )% General and administrative expenses 958,000 1,286,000 (26 )% Operating Loss (2,779,000 ) (2,769,000 ) 0.36 % Revenues
As a result of the nature of our target market and the current stage of our development, a substantial portion of our revenue comes from a limited number of customers.
For the three months ended
The increase in revenues was primarily due to the completion of development of
the product relating to our miniature camera solution with a Fortune 500 company
and moving to production stage. Total revenues recorded from our miniature
camera solution with the Fortune 500 company for the three months ended
Cost of Revenues
Cost of revenue is primarily comprised of cost of personnel including warehouse personnel costs, certain allocated facilities, and expenses associated with logistics and quality control.
Cost of revenues for the three months ended
The increase was primarily due to an increase in material costs due to an increase in the number of products sold and supplied to the Fortune 500 company.
Gross Loss
Gross loss for the three months ended
The decrease was primarily due to increase in revenues partially offset by increase in cost of revenues, as described above.
Research and Development Expenses
Research and development efforts are focused on new product development and on developing additional functionality for our new and existing products. These expenses primarily consist of employee-related expenses, including salaries, benefits, and stock-based compensation expense for personnel engaged in research and development functions, consulting, and professional fees related to research and development activities, prototype materials, facility costs, and other allocated expenses, which include expenses for rent and maintenance of our facility, utilities, depreciation, and other supplies. We expense research and development costs as incurred.
Research and development expenses for the three months ended
The increase was primarily due to an increase in payroll expenses due to additional employee recruitments, and to increased expenses for materials, subcontractors, rent, and maintenance due to enlarging our focus on R&D activities in the domain of I4.0.
We expect that our research and development expenses will increase as we continue to develop our products and service and recruit additional research and development employees to the I4.0 domain.
-18- Sales and Marketing Expenses
Sales and marketing expenses primarily consist of personnel costs, consulting services, promotional materials, demonstration equipment, and certain allocated facility infrastructure costs.
Sales and marketing expenses for the three months ended
The decrease was primarily due to a decrease in payroll expenses (including stock-based compensation) due to the resignation of a VP Business Development.
We expect that our selling and marketing expenses will increase as we increase our selling and marketing efforts in the I4.0 domain.
General and Administrative Expenses
General and administrative expenses primarily consist of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor, public relations, accounting, auditing, tax services, and insurance costs.
General and administrative expenses for the three months ended
The decrease was primarily due to a decrease in stock-based compensation due to vesting of options and to a decrease in D&O insurance costs.
Operating loss
We incurred an operating loss of
The increase in operating loss was primarily due to increases in expenses related to research and development, partially offset by decrease in general and administrative expenses and sales and marketing expenses, as described above.
Liquidity and Capital Resources
As of
Our primary sources of liquidity to date have been from fund raising and warrant exercises.
Additional Cash Requirements
We plan to continue to invest for long-term growth, and therefore we expect that our expenses will increase. We currently believe that our existing cash and cash equivalents and short-term deposits will allow us to fund our operating plan through at least the next 12 months. We expect our expenses will increase in connection with our ongoing activities, particularly as we continue the research and development and the scale up process of our I4.0 solutions. We expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. We may raise these funds through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our common stock. There is no assurance that we will be able to maintain operations at a level sufficient for investors to obtain a return on their investment in our common stock, or that we will be able to raise sufficient capital required to implement our business plan on acceptable terms, if at all. Even if we are successful in raising sufficient capital to implement our business plan, we will, most likely, continue to be unprofitable for the foreseeable future. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.
-19- Cash Flows
The following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):
Three month ended March 31, 2023 2022 Cash used in Operating Activity (2,474,000 ) (224,000 ) Cash used in Investing Activity (12,015,000 ) (24,000 ) Cash provided by Financing Activity 13,977,000 - Operating Activities
Our primary uses of cash from operating activities have been for headcount-related expenditures, research and development costs, manufacturing costs, marketing and promotional expenses, professional services cost and costs related to our facilities. Our cash flows from operating activities will continue to be affected due to the expected increase of spending on our business and our working capital requirements.
During the three months ended
During the three months ended
Investing Activities
During the three months ended
During the three months ended
Financing Activities
During the three months ended
-20-
Off-Balance Sheet Arrangements
None.
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