Revenue Dependence and Customer Risks - The company reported that a single customer accounted for approximately 98% of its revenues for 2023, down from 81% in 2022, indicating a significant reliance on this customer for future revenue [91]. - The company has initiated proactive market penetration into industries beyond the biomedical sector, such as defense and aviation, to diversify its revenue streams [93]. Financial Position and Funding Challenges - As of December 31, 2023, the company's cash and short-term deposit balance was $17 million, highlighting potential funding challenges for growth and product development [89]. - The company may require substantial additional funding to support operations and product development, with no assurance that financing will be available on acceptable terms [89]. - The company has not achieved profitability in any full fiscal year since inception, raising concerns about its ability to sustain operations and growth [85]. Operational and Market Risks - The company is facing risks related to political and military instability in Israel, which could negatively impact operations and financial results [83]. - Inflationary pressures in the U.S. may lead to increased operating costs and reduced demand for the company's products, adversely affecting profitability [97]. - The company anticipates facing competition from established technologies and larger firms with greater resources, which could hinder its market position and profitability [105]. Regulatory and Compliance Risks - The company is subject to various anti-bribery and anti-corruption laws, which could lead to significant penalties and adverse consequences if violated [106]. - Regulatory compliance for new technologies may delay marketing and impose costly procedures, affecting revenue generation [125]. - The company may face product liability claims and regulatory actions that could divert management's attention and harm its business [122]. Intellectual Property and Technology Risks - The company may face challenges in obtaining patents or protecting its proprietary technology, which could hinder its competitive advantage [107]. - The enforcement of intellectual property rights can be costly and uncertain, potentially diverting management's attention and resources [108]. - There is a risk of infringement claims that could lead to costly litigation and impact the company's operations [118]. - The company plans to rely on a combination of copyrights, trademarks, and trade secrets to protect its intellectual property, but enforcement may be limited [109]. Human Resources and Talent Management - The company relies on highly skilled personnel, and failure to attract or retain such talent could impact operational effectiveness [126]. - The company may face challenges in attracting and retaining qualified personnel, which could adversely affect its business and financial results [128]. Stock and Corporate Governance Issues - Mr. Arkin holds approximately 55.60% of the company's Common Stock, which may lead to conflicts of interest and limit the influence of minority stockholders [133]. - The company's Common Stock is currently classified as a "penny stock," which imposes additional sales practice requirements on broker-dealers and may affect liquidity [143]. - Future issuances of Common Stock could dilute the ownership interests of current stockholders [149]. - The company may face significant costs associated with compliance to federal securities laws, impacting its financial condition [148]. - The trading of the company's Common Stock on the OTC Markets is characterized by volatility and thin trading, which could depress its market price [138]. - The company may be considered a "controlled company" if it lists on Nasdaq, potentially relying on exemptions from certain corporate governance requirements [134]. Cybersecurity and Operational Continuity - Cybersecurity threats pose risks to the company's information systems, which could harm its reputation and business operations if breached [131]. Impact of Current Events - The ongoing war in Israel, which escalated on October 7, 2023, has not yet had a material adverse effect on the company's business, although minor disruptions have occurred [156]. - The company has experienced some difficulties in traveling outside of Israel and occasional rocket fire on municipalities where its offices are located, requiring temporary shelter for employees [156]. - The company has taken measures to mitigate the effects of the war, including work-from-home policies and increased employee overtime [156]. Currency and Exchange Rate Risks - The company is exposed to currency fluctuation risks as some expenses are in New Israeli Shekels (NIS), while revenues are primarily in U.S. dollars [167]. - Exchange rate movements have impacted the company's consolidated revenues and operating results, with ongoing global political and economic uncertainty expected to continue affecting financial results [168]. Employee Rights and Legal Risks - The company may face claims for remuneration or royalties for assigned service invention rights by employees, which could result in litigation and adversely affect its business [172]. Reporting and Disclosure - The company is classified as a smaller reporting company and is not required to provide the information required by Item 7A [279].
Odysight.ai Inc(ODYS) - 2023 Q4 - Annual Report