Foresight(FRSX) - 2024 Q4 - Annual Report

PART I Key Information This section details the company's significant risks, including its development-stage status, history of losses, going concern opinion, and geopolitical risks Risk Factors The company faces substantial risks including limited operating history, significant accumulated losses, a going concern opinion, and geopolitical instability - The company is a development-stage entity and has incurred net losses of approximately $131,028,000 since its merger in 2015 through December 31, 2024[52][53] - The audited financial statements for FY 2024 include an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern, which could materially limit its ability to raise additional funds[55] - As of March 17, 2025, principal shareholders, officers, and directors beneficially own approximately 10.57% of the company's Ordinary Shares, giving them significant control over shareholder matters[113] - The company's operations are exposed to political, economic, and military instability in Israel, including the Israel-Hamas and Israel-Hezbollah wars, which could adversely affect business operations[125][126][128] - The company received a notice of non-compliance from Nasdaq on September 3, 2024, for failing to maintain a minimum bid price of $1.00. It regained compliance on January 7, 2025, but there is a risk of future non-compliance and potential delisting[145][146][147] Information on the Company Foresight develops 3D perception and V2X collision prevention systems for diverse markets, outlining its history, structure, and sales strategy History and Development of the Company The company, incorporated in Israel in 1977, became Foresight Autonomous Holdings Ltd. in 2016, trading on TASE and Nasdaq, and spun out Eye-Net Mobile - The company was incorporated in Israel in 1977, changed its name to Foresight Autonomous Holdings Ltd. in 2016, and its ADSs trade on the Nasdaq Capital Market under the symbol "FRSX"[148] Capital Expenditures (2022-2024) | Year | Capital Expenditures (USD) | | :--- | :--- | | 2024 | $62,000 | | 2023 | $124,000 | | 2022 | $313,000 | Business Overview Foresight develops 3D perception and V2X collision prevention systems for diverse markets, pursuing commercial agreements through a multi-step sales strategy - The company's 3D perception systems (ScaleCam™, QuadSight®) are designed for diverse markets including automotive, defense, agriculture, and UAVs, offering features like automatic calibration and operability in harsh weather[155][157][195] - Eye-Net Mobile develops cellular-based V2X collision prevention solutions (Eye-Net™ Protect, Eye-Net™ Sense) that provide real-time alerts to all road users using existing cellular networks and AI[156][252][268] - The company has signed significant commercial agreements, including one with SUNWAY for up to $51 million for obstacle detection systems and another with Elbit for up to $4 million for its image processing software in the defense sector[225] - The sales strategy focuses on a multi-step process: initial engagement through demonstrations, paid Proof of Concept (POC) projects (typically $25k-$100k), co-development projects, and ultimately large-scale commercial production agreements (design win)[224] Research and Development Expenses (Net) | Year | R&D Expenses (USD) | | :--- | :--- | | 2024 | $9,143,000 | | 2023 | $11,587,000 | | 2022 | $11,534,000 | Organizational Structure The company's organizational structure includes two wholly-owned Israeli subsidiaries and a Chinese subsidiary, with Magna B.S.P. Ltd. holding a significant share - The company has two wholly-owned subsidiaries: Foresight Automotive Ltd. and Eye-Net Mobile Ltd[301] - Foresight Automotive has a wholly-owned subsidiary in China, Foresight Changzhou Automotive Ltd., established in January 2022 to facilitate entry into the Chinese market[301][302] Property, Plants and Equipment The company leases an 11,000 sq ft office and R&D facility in Ness Ziona, Israel, with a lease expiring March 2027 - The company leases approximately 11,000 square feet for its office and R&D facility in Ness Ziona, Israel. The lease expires on March 31, 2027, with a monthly rent of about NIS 106,000[304] Operating and Financial Review and Prospects This section analyzes the company's financial performance, noting a reduced net loss in FY2024, but highlights ongoing liquidity concerns and reliance on equity financing Operating Results Foresight's FY2024 revenues decreased, but operating and net losses significantly improved due to reduced expenses and net financial income Consolidated Results of Operations (FY 2024 vs. FY 2023) | Metric | 2024 (USD in thousands) | 2023 (USD in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | 436 | 497 | -12.3% | | Gross profit | 264 | 354 | -25.4% | | R&D expenses, net | 9,143 | 11,587 | -21.1% | | Marketing and sales | 1,120 | 1,939 | -42.2% | | General and administrative | 2,677 | 3,119 | -14.2% | | Operating loss | 12,676 | 16,291 | -22.2% | | Financial (income) expenses, net | (1,538) | 2,119 | N/A | | Net loss | 11,138 | 18,410 | -39.5% | - Revenues in 2024 were primarily generated from the commercial agreement with Elbit ($162k) and various POC projects with customers like KONEC ($55k), SoftBank ($74k), and Japanese vehicle manufacturers ($83k)[318] - The decrease in R&D expenses in 2024 was mainly due to lower payroll and subcontracting costs, while the decrease in sales and marketing expenses was driven by reduced payroll, consultant, and exhibition costs[319][320] Liquidity and Capital Resources As of December 31, 2024, the company had $7.2 million in cash, with a going concern warning, relying on equity financing to fund operations through January 2026 - As of Dec 31, 2024, the company had approximately $7.2 million in cash and cash equivalents. Existing cash is expected to be sufficient to support operations only through January 2026, raising substantial doubt about its ability to continue as a going concern[327][328] Consolidated Cash Flows (FY 2024 vs. FY 2023) | Cash Flow Activity | 2024 (USD in thousands) | 2023 (USD in thousands) | | :--- | :--- | :--- | | Operating activities | (11,055) | (14,926) | | Investing activities | 1,785 | 7,092 | | Financing activities | 903 | 4,181 | | Net decrease in cash | (8,552) | (3,541) | - In March 2025, Eye-Net Mobile secured an investment of approximately $2.75 million from institutional and private investors based on a pre-money valuation of $45 million[340] - The company utilizes an "at-the-market" offering agreement (2024 Sales Agreement) with A.G.P. to raise capital. As of March 17, 2025, it has raised aggregate gross proceeds of $2.87 million under this agreement[338] Directors, Senior Management and Employees This section outlines the company's leadership, compensation practices, board structure, and employee base, noting a decrease in total employees to 72 in 2024 Compensation Aggregate compensation for directors and senior management in FY2024 totaled over $1.5 million, including significant RSU grants Aggregate Compensation for Directors and Senior Management (FY 2024) | Compensation Type | Amount (USD) | | :--- | :--- | | Salary and Other Benefits | $988,888 | | Pension, Retirement and Similar Benefits | $156,209 | | Share Based Compensation | $411,254 | Compensation of 5 Most Highly Compensated Officers (FY 2024) | Executive Officer | Salary and Related Benefits (USD) | Share Based Compensation (USD) | Total (USD) | | :--- | :--- | :--- | :--- | | Haim Siboni | $233,577 | $141,376 | $374,953 | | Eli Yoresh | $140,146 | $102,372 | $242,518 | | Dror Elbaz | $199,339 | $6,378 | $205,717 | | Oren Bar-On | $157,969 | $33,370 | $191,339 | | Izac Assia | $155,217 | $34,719 | $189,936 | - In July and August 2024, the company granted a significant number of RSUs to senior officers (12,780,000) and board members, including the CEO (9,000,000), under its new 2024 Share Incentive Plan[382][383] Board Practices The Board consists of six members, including two external directors, with the Chairman also serving as CEO, and an audit committee overseeing compensation - The Board of Directors consists of six members, including two external directors (Zeev Levenberg and Daniel Avidan) as required by the Israeli Companies Law[387][395] - Haim Siboni serves in the combined role of Chairman of the Board and CEO, which was approved by shareholders on August 26, 2024, for a three-year term[392] - The Audit Committee, comprised of three independent directors, also functions as the Compensation Committee and Financial Statements Examination Committee[410][413][419] - An amended and restated compensation policy was approved by shareholders on August 26, 2024, for a three-year period, establishing the framework for executive compensation[424] Employees The company's workforce decreased to 72 employees by December 31, 2024, with the majority in research and development and no union representation Employee Headcount by Year and Department | Department | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | :--- | | Research and Development | 54 | 63 | 64 | | Management and Administration | 8 | 8 | 10 | | Sales and Marketing | 7 | 6 | 8 | | Operations | 3 | 4 | 5 | | Total Employees | 72 | 81 | 87 | Major Shareholders and Related Party Transactions This section details the company's ownership structure, with CEO Haim Siboni as the largest beneficial owner, and outlines related party transactions - As of March 17, 2025, CEO Haim Siboni beneficially owned 7.95% of the company's shares, and all directors and executive officers as a group beneficially owned 10.57%[487] - The company has a services agreement with Magna B.S.P. Ltd. (a significant shareholder controlled by the CEO) for R&D services. Due to cost-saving measures, the payment for these services in 2024 (totaling $181,000) was waived and recorded as a capital contribution from Magna[497][499] - Insider participants, including the CEO (via Magna) and the VP of Human Resources, invested an aggregate of $525,000 in the December 2023 Registered Direct Offering[501] Financial Information This section confirms financial statements are under Item 18, states no material legal proceedings, and notes no cash dividends have ever been paid - The company is not currently subject to any material legal proceedings[503] - The company has never declared or paid any cash dividends and does not anticipate paying any in the foreseeable future[504] The Offer and Listing This section details the trading of the company's Ordinary Shares on the TASE and its ADSs on the Nasdaq Capital Market under "FRSX" - The company's Ordinary Shares trade on the TASE, and its ADSs trade on the Nasdaq Capital Market under the symbol "FRSX"[508][510] Additional Information This section covers material contracts, exchange controls, and taxation, including Israeli corporate tax and potential PFIC classification for U.S. shareholders - There are currently no Israeli currency control restrictions on dividend payments, but such payments may be subject to Israeli withholding taxes[516] - The general corporate tax rate in Israel is 23%. The company may receive tax benefits related to R&D grants from the Israel Innovation Authority (IIA), but this also imposes restrictions on transferring technology or manufacturing outside of Israel[520][526] - For U.S. federal income tax purposes, there is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC), which would have adverse tax consequences for U.S. shareholders. The company does not expect to be a PFIC for 2024 but makes no assurances[118][554] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is foreign currency exchange rate fluctuations between NIS and USD, with no current hedging strategies - The company's main market risk is foreign currency exchange risk, particularly between the NIS and the U.S. dollar, as a large portion of its expenses are in NIS[576][578] - A 5% change in the USD/NIS exchange rate would have resulted in a 4.51% change in operating expenses for 2024. The company does not currently hedge this currency risk[578][579] Description of Securities Other than Equity Securities This section details the fees charged by The Bank of New York Mellon for holding the company's American Depositary Shares (ADSs) ADS Holder Fees | Fee | For | | :--- | :--- | | $5.00 (or less) per 100 ADSs | Issuance or cancellation of ADSs | | $.05 (or less) per ADS | Any cash distribution | | $.05 (or less) per ADS per year | Depositary services | PART II Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2024 - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were effective[590] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2024[592] - The annual report does not include an attestation report from the public accounting firm on internal controls because the company is a non-accelerated filer[593] Corporate Governance and Other Matters This section covers corporate governance, including audit committee, code of ethics, accountant fees, Israeli home country practices, and cybersecurity Principal Accountant Fees and Services Fees paid to Brightman Almagor Zohar & Co. (Deloitte) for FY2024 totaled $89,882, primarily for audit and audit-related services Accountant Fees (FY 2024 vs. FY 2023) | Fee Category | 2024 (USD) | 2023 (USD) | | :--- | :--- | :--- | | Audit fees | $64,882 | $66,225 | | Audit-Related Fees | $25,000 | $15,000 | | Tax Fees | - | - | | All Other Fees | - | - | | Total | $89,882 | $81,225 | Corporate Governance As a foreign private issuer, the company follows Israeli corporate governance practices, differing from Nasdaq rules on quorum, director nominations, and shareholder approval - The company follows Israeli home country practices for corporate governance, exempting it from certain Nasdaq rules[605] - Key exemptions include quorum requirements for adjourned meetings, director nominations by the Board instead of a nominating committee, and different shareholder approval thresholds for certain transactions as dictated by Israeli law[607][608][609] Cybersecurity The company maintains an ISO/IEC 27001 certified cybersecurity program, overseen by the Board and CISO, including annual penetration tests and insurance - The company's cybersecurity program is overseen by the Board and Audit Committee and managed by a CISO[615][620] - The company is ISO/IEC 27001 certified, conducts annual third-party penetration tests, and maintains a Disaster Recovery Plan (DRP) and cybersecurity insurance[616][618][621] - Cybersecurity threats have not materially affected or are reasonably likely to materially affect the company's business strategy, results of operations, or financial condition[623] PART III Financial Statements This section presents audited consolidated financial statements, including the auditor's "Going Concern" warning due to significant losses, and key FY2024 financial data Report of Independent Registered Public Accounting Firm The auditor's report expresses a fair opinion but includes a "Going Concern" paragraph due to significant operating losses, raising doubt about continuity - The auditor's report contains a "Going Concern" paragraph, citing the company's lack of significant revenues and substantial operating losses as factors that raise doubt about its ability to continue operations[637] Consolidated Balance Sheets As of December 31, 2024, total assets decreased to $9.7 million, driven by reduced cash, with corresponding decreases in liabilities and equity Consolidated Balance Sheet Data (As of Dec 31) | Account | 2024 (USD in thousands) | 2023 (USD in thousands) | | :--- | :--- | :--- | | Total Assets | 9,745 | 19,310 | | Cash and cash equivalents | 7,082 | 15,635 | | Total Liabilities | 3,015 | 3,315 | | Total Equity | 6,730 | 15,995 | Consolidated Statements of Comprehensive Loss For FY2024, the company reported a net loss of $11.1 million, a significant improvement from prior years due to lower operating expenses and net financial income Consolidated Statement of Comprehensive Loss | Metric (USD in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Revenues | 436 | 497 | 550 | | Operating loss | 12,676 | 16,291 | 17,455 | | Net Loss | 11,138 | 18,410 | 21,676 | | Basic and diluted loss per share (USD) | (0.02) | (0.06) | (0.07) | Consolidated Statements of Cash Flows In FY2024, net cash used in operating activities improved, with cash provided by investing and financing, resulting in an overall cash decrease of $8.6 million Consolidated Cash Flow Summary (Year ended Dec 31) | Activity (USD in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | (11,055) | (14,926) | | Net cash provided by investing activities | 1,785 | 7,092 | | Net cash provided by financing activities | 903 | 4,181 | | Net decrease in cash | (8,552) | (3,541) |