Rail Vision(RVSN) - 2024 Q2 - Quarterly Report

Interim Condensed Financial Statements (Unaudited) This section presents the unaudited interim financial statements, covering balance sheets, comprehensive loss, equity, cash flows, and notes Interim Condensed Balance Sheets The company's total assets significantly increased from $5,921 thousand as of December 31, 2023, to $12,452 thousand as of June 30, 2024, primarily driven by a substantial increase in cash and cash equivalents. Total shareholders' equity also saw a notable rise from $2,787 thousand to $9,896 thousand during the same period Interim Condensed Balance Sheets (U.S. dollars in thousands) | Metric | June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--------------------------- | :------------------------ | :-------------------------- | | Cash and cash equivalents | $9,691 | $3,066 | | Restricted cash | $215 | $223 | | Accounts receivable | $135 | $0 | | Inventories | $968 | $977 | | Other current assets | $354 | $336 | | Total current assets | $11,363 | $4,602 | | Operating lease - right of use asset | $738 | $889 | | Fixed assets, net | $351 | $430 | | Total assets | $12,452 | $5,921 | | Trade accounts payables | $88 | $185 | | Current operating lease liability | $282 | $285 | | Other accounts payable | $1,823 | $2,140 | | Total current liabilities | $2,193 | $2,610 | | Non-current operating lease liability | $363 | $524 | | Total liabilities | $2,556 | $3,134 | | Ordinary shares | $0 | $68 | | Additional paid in capital | $100,182 | $68,681 | | Accumulated deficit | $(90,286) | $(65,962) | | Total shareholders' equity | $9,896 | $2,787 | | Total liabilities and shareholders' equity | $12,452 | $5,921 | Unaudited Interim Condensed Statements of Comprehensive Loss For the six months ended June 30, 2024, the company reported revenues of $761 thousand, a significant increase from zero in the prior year period. However, net loss widened substantially to $(24,324) thousand from $(5,835) thousand, primarily due to a large revaluation of derivative warrant liabilities amounting to $(18,835) thousand. Operating loss improved to $(4,185) thousand from $(5,985) thousand Unaudited Interim Condensed Statements of Comprehensive Loss (U.S. dollars in thousands) | Metric | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $761 | $0 | | Cost of revenues | $(372) | $0 | | Gross profit | $389 | $0 | | Research and development expenses | $(2,458) | $(3,682) | | General and administrative expenses | $(2,116) | $(2,303) | | Operating loss | $(4,185) | $(5,985) | | Revaluation of derivative warrant liabilities | $(18,835) | $0 | | Other financing income (expenses), net | $(1,304) | $150 | | Net loss for the period | $(24,324) | $(5,835) | | Basic and diluted loss per share | $(1.99) | $(2.69) | Unaudited Interim Condensed Statements of Changes in Shareholders' Equity Shareholders' equity increased significantly from $2,787 thousand at January 1, 2024, to $9,896 thousand by June 30, 2024. This increase was primarily driven by $23,791 thousand from warrant exercises and $6,143 thousand from the reclassification of warrant liabilities to equity, partially offset by a net loss of $(24,324) thousand Statements of Changes in Shareholders' Equity (Six months ended June 30, 2024, U.S. dollars in thousands) | Item | Ordinary Number of shares | Shares USD | Additional paid in capital | Accumulated Deficit | Total shareholders' equity | | :---------------------------------------------------------------- | :------------------------ | :--------- | :------------------------- | :------------------ | :------------------------- | | Balance as of January 1, 2024 | 2,998,278 | 68 | 68,681 | (65,962) | 2,787 | | Cancelation of the par value of ordinary shares | – | (68) | 68 | – | – | | Issuance of units of ordinary shares and prefunded warrants, net of issuance costs | 3,554,200 | – | 1,404 | – | 1,404 | | Exercise of warrants to ordinary shares, net of issuance costs | 12,258,487 | – | 23,791 | – | 23,791 | | Classification of warrant liabilities to equity warrants | – | – | 6,143 | – | 6,143 | | Share-based payment | – | – | 95 | – | 95 | | Net loss for the period | – | – | – | (24,324) | (24,324) | | Balance as of June 30, 2024 | 18,810,965 | – | 100,182 | (90,286) | 9,896 | Statements of Changes in Shareholders' Equity (Six months ended June 30, 2023, U.S. dollars in thousands) | Item | Ordinary Number of shares | Shares USD | Additional paid in capital | Accumulated Deficit | Total shareholders' equity | | :---------------------------------------------------------------- | :------------------------ | :--------- | :------------------------- | :------------------ | :------------------------- | | Balance as of January 1, 2023 | 1,987,005 | 46 | 63,033 | (54,814) | 8,265 | | Issuance of shares as a result of exercise of warrants | 24,431 | 1 | (1) | – | – | | Issuance of units of ordinary shares and warrants, net of issuance costs | 986,842 | 21 | 5,374 | – | 5,395 | | Share-based payment | – | – | 165 | – | 165 | | Net loss for the period | – | – | – | (5,835) | (5,835) | | Balance as of June 30, 2023 | 2,998,278 | 68 | 68,571 | (60,649) | 7,990 | Unaudited Interim Condensed Statements of Cash Flows For the six months ended June 30, 2024, net cash used in operating activities decreased to $(4,595) thousand from $(5,409) thousand in the prior year. Net cash provided by financing activities significantly increased to $11,274 thousand from $5,460 thousand, primarily due to proceeds from warrant exercises and issuance of shares. This resulted in a net increase in cash, cash equivalents, and restricted cash of $6,617 thousand, ending the period with $9,906 thousand Unaudited Interim Condensed Statements of Cash Flows (U.S. dollars in thousands) | Cash Flow Activity | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Net loss for the period | $(24,324) | $(5,835) | | Depreciation | $85 | $80 | | Share-based payment | $95 | $165 | | Change in operating lease liability | $(13) | $(39) | | Effect of exchange rate changes on cash and cash equivalents | $56 | $0 | | Revaluation of derivative warrant liabilities | $18,835 | $0 | | Amortization of a discount related to a convertible loan credit facility | $1,229 | $0 | | Increase in accounts receivables | $(135) | $0 | | Increase in other current assets | $(18) | $(80) | | Decrease (increase) in Inventories | $9 | $(491) | | Increase (decrease) in trade accounts payable | $(97) | $167 | | Increase (decrease) in other accounts payable | $(317) | $624 | | Net cash used in operating activities | $(4,595) | $(5,409) | | Purchase of fixed assets | $(6) | $(137) | | Net cash used in investing activities | $(6) | $(137) | | Proceeds from a convertible loan credit facility and issuance of warrants | $1,500 | $0 | | Payments on convertible loan credit facility | $(1,000) | $0 | | Proceeds from exercise of warrants, net of issuance expenses | $7,813 | $0 | | Proceeds from issuance of shares and warrants, net of issuance expenses | $2,961 | $5,460 | | Net cash provided by financing activities | $11,274 | $5,460 | | Effect of exchange rate changes on cash and cash equivalents | $(56) | $0 | | Increase (Decrease) in cash, cash equivalents and restricted cash | $6,617 | $(86) | | Cash, cash equivalents and restricted cash at the beginning of the period | $3,289 | $8,492 | | Cash, cash equivalents and restricted cash at the end of the period | $9,906 | $8,406 | | Non Cash Activities: Conversion of a convertible loan credit facility to ordinary shares | $500 | $0 | | Non Cash Activities: Issuance expenses recorded in other accounts payables | $0 | $65 | Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) These notes provide additional context and detail to the interim condensed financial statements, covering the company's reporting entity, significant accounting policies, and major events during the reporting period and subsequent to it. Key areas include the company's development-stage status, ongoing operating losses, capital raising activities, and significant customer contracts Note 1 – General This note details the company's development-stage status, persistent operating losses, and funding strategy through sales and capital raises - Rail Vision Ltd. is a development-stage technology company specializing in railway detection systems, incorporated in Israel on April 18, 2016[23] - The company has not generated significant revenues and has incurred substantial operating losses, expecting this trend to continue[12][24] - Management expects current financial resources, product sales, and additional capital raises to fund operations, with recent capital raises of approximately $12 million anticipated to cover 12 months of operations[12][25] Note 2 – Basis of Presentation and Significant Accounting Policies This note outlines the basis for interim financial statement presentation, covering reporting entity, key accounting policies, and management estimates A. Reporting Entity This section clarifies the company's reporting context, emphasizing the need to read interim statements with audited annual reports and highlighting ongoing operating losses and funding strategies - Interim financial statements should be read in conjunction with the Company's audited financial statements as of December 31, 2023, and the Annual Report on Form 20-F[11] - The Company has not generated significant revenues and expects to continue incurring substantial operating losses, funding operations through current resources, product sales, and additional capital raises[12] B. Significant Accounting Policies This section details the company's key accounting policies, particularly regarding the classification and fair value measurement of warrants as derivative liabilities, and the application of ASC 820 - Warrants are classified as derivative liabilities and measured at fair value (Level 3 hierarchy) due to provisions in the warrant agreement that preclude equity accounting[15][28][31] - Fair value measurements are determined using ASC 820, considering market participant assumptions and hierarchical levels (Level 1, 2, 3) based on input observability[16][29][30] - As of June 30, 2024, no liabilities were classified within Level 3 of the fair value hierarchy, as the warrant liability was reclassified to equity on June 29, 2024[31][49] C. Use of estimates This section acknowledges that financial statements rely on management's estimates, judgments, and assumptions, which are considered reasonable but may differ from actual outcomes - Financial statements require management estimates, judgments, and assumptions, which are believed to be reasonable but actual results may vary[17][81] Note 3 – Significant Events in the Reporting Period This note details significant financial and operational events, including credit facilities, private placements, customer orders, warrant exercises, and shareholder approvals A. Execution of Credit Facility Agreement and Issuance of Facility Warrant This section details the company's $6,000 thousand credit facility, its termination, the issuance of a Facility Warrant, and its subsequent reclassification to equity - On January 9, 2024, the Company entered into a $6,000 thousand credit facility with an additional $3,000 thousand available, accruing 8% interest[82][93] - The credit facility terminated on March 1, 2024, after the Company received over $5,000 thousand from equity financing[33][93] - A Facility Warrant was issued to purchase 2,419,354 ordinary shares at $3.10, later adjusted to 18,382,353 shares at $0.408 due to anti-dilution protection[35][95] Facility Warrant Exercise Proceeds (U.S. dollars in thousands) | Period | Gross Proceeds | | :----------------------------------- | :------------- | | As of June 30, 2024 | $2,742 | | Subsequent to June 30, 2024 (additional) | $530 | - The Facility Warrants were reclassified from derivative liabilities to additional paid-in capital in the amount of $6,143 thousand on June 29, 2024, as they were no longer considered non-indexed to the Company's own equity[48][49] B. January 2024 private placement ("PIPE") This section describes the January 2024 private placement, which raised $3,000 thousand, involved the issuance of units and warrants, and led to the conversion of a convertible loan - The January 2024 PIPE closed on January 31, 2024, raising $3,000 thousand ($2,961 thousand net of issuance costs) through the sale of 3,046,457 Units[50][97] - Each Unit consisted of ordinary shares/pre-funded warrants and common warrants, with PIPE Pre-Funded Warrants immediately exercisable at $0.0001 and PIPE Common Warrants exercisable at $0.98475[38][97] - In connection with the PIPE, $500 thousand of the convertible loan was converted, resulting in the issuance of 507,743 Facility Conversion Pre-Funded Warrants and 761,615 Facility Conversion Common Warrants[19][98] - As of June 30, 2024, all January 2024 PIPE Pre-Funded Warrants, Facility Conversion Pre-Funded Warrants, Facility Conversion Common Warrants, and January 2024 PIPE Warrants have been exercised, yielding approximately $5,250 thousand in gross proceeds ($5,063 thousand net)[53] C. A Leading US-Based Rail & Leasing Services Company Orders Rail Vision Switch Yard Systems Valued at Up to $5 Million This section details a significant supply contract for Switch Yard Systems with a leading US-based rail and leasing services company, including initial and potential follow-on orders totaling up to $5,000 thousand - In January 2024, a supply contract was signed with a leading US-based rail and leasing services company for Switch Yard Systems[41] - An initial purchase order of approximately $1,000 thousand was received in April 2024, with potential follow-on orders up to $4,000 thousand, totaling a contract value of up to $5,000 thousand[54][99] - A follow-on order for approximately $200 thousand for additional services was received in June 2024[42] - As of June 30, 2024, a payment of $375 thousand from this customer was recorded as deferred revenues[55] D. Warrants Exercise (May 2023 Private Placement) This section reports on the cashless exercise of 493,424 warrants from a May 2023 private placement, resulting in the issuance of 181,002 ordinary shares - In January 2024, 493,424 warrants from a May 2023 private placement were exercised on a cashless basis[100] - This cashless exercise resulted in the issuance of 181,002 ordinary shares to the investors[100] E. Extraordinary General Meeting of Shareholders This section notes the shareholder approval for the cancellation of ordinary share par value and the increase in registered share capital to 100,000,000 ordinary shares - Shareholders approved the cancellation of the par value of ordinary shares on February 21, 2024[43] - The registered share capital was increased from 12,500,000 to 100,000,000 ordinary shares[43] Note 4 – Subsequent Events This note describes significant events post-reporting period, including warrant exercises and new purchase orders from railway and mining customers A. Exercise of Facility Warrants This section directs to Note 3A for details regarding the exercise of Facility Warrants, which occurred subsequent to the reporting period - Refer to Note 3A for details regarding the exercise of Facility Warrants[60] F. Purchase Order from Loram, a Top US-Based Railway Track Maintenance Supplier This section details a purchase order for the Switch Yard System from Loram, including its successful delivery and installation as a pilot project, and recognized revenues - In April 2024, an order for the Switch Yard System was received from Loram, a leading US-based railway track maintenance supplier[61] - In June 2024, the Shunting Yard product was successfully delivered and installed for Loram, marking the start of a pilot project[57] - Approximately $145 thousand in revenues were recognized from this sale and related services during the six months ended June 30, 2024[57] G. Israel Railways Commercial Agreement This section outlines the commercial agreement with Israel Railways for ten Main Line Systems and services, valued at approximately $1,400 thousand, with initial installations completed and revenues recognized - An agreement was signed with Israel Railways in January 2023 for ten Main Line Systems and services, valued at approximately $1,400 thousand[58] - The first installation of Main Line Systems for Israel Railways was completed in February 2024[62] - Approximately $101 thousand in revenues were recognized from this agreement during the six months ended June 30, 2024[62] H. Purchase Order from a Leading Latin America Mining Company This section details a $492 thousand purchase order from a LATAM mining company for a Main Line system and services, including successful installation, training, and recognized revenues, along with a follow-on order - A $492 thousand purchase order for a Main Line system and services was received from a LATAM mining company in October 2023[63] - System installation and training sessions were successfully completed in June 2024[64] - Approximately $516 thousand in revenues were recognized from these purchase orders during the six months ended June 30, 2024[64] - A follow-on order for additional services, amounting to approximately $24 thousand, was received in June 2024[59] I. Purchase Order from a Class 1 US Railroad Company This section describes a purchase order for the Switch Yard System from a Class 1 US freight rail company, its installation for an evaluation trial, and the accounting treatment of related payments - An order for the Switch Yard System was received from a Class 1 US freight rail company on March 11, 2024[65] - The system was successfully installed on June 10, 2024, for an evaluation trial period expected to end in November 2024[60] - A payment of $81 thousand was recorded as deferred revenue, and approximately $61 thousand as deferred expenses, due to the single performance obligation for delivery and trial services[60]