Rail Vision(RVSN) - 2024 Q4 - Annual Report

Introduction Emerging Growth Company Status Rail Vision is an "emerging growth company" under the JOBS Act, benefiting from reporting exemptions until specific revenue or time thresholds are met - The company is classified as an "emerging growth company," which exempts it from certain SEC reporting requirements, such as auditor attestation on internal controls[17][21] - This status will be maintained until the earliest of: reaching $1.07 billion in annual gross revenues, December 31, 2027, becoming a "large accelerated filer," or issuing over $1.0 billion in non-convertible debt within a three-year period[18] Cautionary Note Regarding Forward-Looking Statements The report contains forward-looking statements subject to risks, including limited operating history, capital needs, and market acceptance - The report includes forward-looking statements concerning objectives, operational results, financial conditions, and product development, which are subject to significant risks and uncertainties[23][24] - Key risk factors that could cause actual results to differ materially include the company's limited operating history, capital needs, ability to commercialize products, and political instability in the Middle East[26][37] PART I Item 3. Key Information This section details significant financial, business, IP, and geopolitical risks, including historical losses and capital needs Risk Factors - The company is an early commercialization stage entity with a limited operating history, having incurred a net loss of approximately $29 million for the year ended December 31, 2024, and an accumulated deficit of about $95 million as of that date[48] - On March 6, 2025, the company received a notification from Nasdaq for failing to meet the minimum bid price requirement of $1.00 per share, and it has until September 2, 2025, to regain compliance[147] - The company's headquarters and significant operations are located in Israel, exposing it to risks from political, economic, and military instability, including the ongoing conflict that began in October 2023[132][133] - There is a risk that the company may be classified as a "passive foreign investment company" (PFIC) for U.S. federal income tax purposes, which could result in negative tax consequences for U.S. shareholders[123] Item 4. Information on the Company Rail Vision, an Israeli tech company, develops AI-based railway detection systems for safety and efficiency, targeting a growing global market History and Development of the Company - Rail Vision Ltd. was incorporated in Israel in April 2016 and is an early commercialization stage technology company focused on revolutionizing railway safety[156][157] - The company qualifies as an "emerging growth company" under the JOBS Act, which allows it to utilize certain exemptions from public company reporting requirements until as late as December 31, 2027[159] Business Overview - Rail Vision develops AI-based railway detection systems using high-resolution visible light and thermal cameras to identify hazards up to 2,000 meters away, aiming to save lives, increase efficiency, and reduce operator expenses[162][163][164] Recent Commercial Traction | Customer/Partner | Date | Details | Value | | :--- | :--- | :--- | :--- | | Israel Railways | Jan 2023 | Purchase of 10 Main Line Systems | - | | Latin American Mining Co. | Oct 2023 | Purchase order for one Main Line System | $500,000 | | US Rail & Leasing Co. | Jan 2024 | Supply contract for AI-based Switch Yard Systems | Up to $5M | | US Class 1 Freight Rail Co. | Mar 2024 | Order for a Switch Yard System for evaluation | - | | Loram (US) | Apr 2024 | Order for a Switch Yard System for a pilot project | - | | Sujan Ventures (India) | Jan 2025 | MOU to introduce technology to the Indian rail market | - | Global Driver Assistance Systems for Locomotives Market Forecast | Year | Market Value (USD) | Projected CAGR (2024-2034) | | :--- | :--- | :--- | | 2023 | $9.5 billion | 4.24% | | 2034 (Projected) | $15.1 billion | 4.24% | - The company's product portfolio includes the Main Line System for passenger and freight trains, the Shunting Yard System for operational areas, and the D.A.S.H. SaaS platform for data analysis and reporting[207][221][230] - Rail Vision's business strategy focuses on three main segments: shunting yards, passenger/freight trains, and data services. Key target markets include North America, Latin America, Israel, and India[235][236] Organizational Structure - The company currently has no subsidiaries[282] Property, Plant and Equipment - The company's corporate headquarters and R&D facility are located in a leased space of approximately 16,900 square feet in Ra'anana, Israel. The current lease ends in September 2026, with an option to extend for an additional five years[283] Item 5. Operating and Financial Review and Prospects FY2024 revenue increased to $1.3M, operating loss narrowed, but a $20.2M non-cash expense led to a $29.0M net loss Operating Results Results of Operations (FY 2024 vs. FY 2023) | Metric | 2024 (in thousands USD) | 2023 (in thousands USD) | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | 1,300 | 142 | +815% | | Gross profit | 450 | 81 | +456% | | Research and development expenses | (5,279) | (7,145) | -26.1% | | General and administrative expenses | (4,175) | (4,339) | -3.8% | | Operating loss | (9,004) | (11,403) | -21.0% | | Revaluation of derivatives and warrants liabilities | (20,181) | - | N/A | | Net Loss | (30,708) | (11,148) | +175% | - The 815% increase in revenue for FY 2024 was primarily driven by sales to a LATAM mining company, initial installations for Israel Railways, and deliveries to Loram and a Class 1 US Railroad company[297] - Research and development expenses decreased by 26.1% in 2024, mainly due to a reduction in workforce, including 12 R&D employees, and lower equipment purchases[299] - The significant increase in net loss to $29.0 million was primarily caused by a $20.2 million non-cash expense related to the revaluation of derivatives and warrants liabilities from financing activities in January 2024[302][304] Liquidity and Capital Resources Cash and Cash Equivalents | Date | Amount (in thousands USD) | | :--- | :--- | | December 31, 2024 | 17,500 | Cash Flow Summary (FY 2024 vs. FY 2023) | Activity | 2024 (in thousands USD) | 2023 (in thousands USD) | | :--- | :--- | :--- | | Net cash used in operating activities | (9,682) | (10,518) | | Net cash used in investing activities | (30) | (152) | | Net cash provided by financing activities | 23,918 | 5,397 | - The company secured significant funding through a Standby Equity Purchase Agreement (SEPA) with Yorkville in October 2024, with aggregate gross proceeds of approximately $18.3 million as of the report date[312][316] - In January 2024, the company raised funds through a private placement (PIPE) and a credit facility, which have resulted in gross proceeds of approximately $12.3 million from the exercise of associated warrants[317][321][332] - Management expects that its cash and cash equivalents as of the report's issuance date, along with future cash flow from sales, will be sufficient for at least 27 months of operations[333] Critical Accounting Estimates - A critical accounting estimate involves the valuation of derivatives and warrants liabilities. Warrants that are not indexed to the company's own equity are classified as liabilities and measured at fair value at each reporting period, with changes recognized in the statement of comprehensive loss[343][658] Item 6. Directors, Senior Management and Employees Details leadership, compensation, and board practices, including executive officers, classified board, and Israeli corporate governance exemptions Directors and Senior Management - The company's leadership includes Shahar Hania as Chief Executive Officer and Ofer Naveh as Chief Financial Officer. The Board of Directors is chaired by Eli Yoresh[344][346][347][351] Compensation Aggregate Compensation for Directors and Senior Management (FY 2024) | Category | Amount (in thousands USD) | | :--- | :--- | | Salary and Related Benefits | 1,319 | | Share Based Compensation | 177 | Compensation of 5 Most Highly Compensated Officers (FY 2024) | Executive Officer | Total Compensation (in thousands USD) | | :--- | :--- | | Shahar Hania, CEO | 349 | | Ofer Naveh, CFO | 299 | | Amit Klir, VP R&D | 226 | | Zachi Bar-Yehoshua, former COO | 178 | | Noam Shloper, COO | 165 | Board Practices - The Board of Directors is divided into three staggered classes with three-year terms[377] - The company has adopted reliefs under Israeli regulations for companies listed on foreign exchanges, which currently exempt it from the requirement to appoint external directors, as a majority of its directors are independent and it has no controlling shareholder[359][386] - The Audit Committee is comprised of Yossi Daskal, Hila Kiron-Revach, and Oz Adler[407] - The Compensation Committee is comprised of Yossi Daskal, Oz Adler, and Hila Kiron-Revach[415] Employees - As of March 30, 2025, the company has 5 senior management members and 47 other employees, all located in Israel[279] Share Ownership - As of March 30, 2025, the company has 4,061,098 ordinary shares reserved for issuance under its equity incentive plan. There are 179,638 options and 2,565,519 RSUs outstanding[451] Item 7. Major Shareholders and Related Party Transactions No major shareholders own over 5% as of March 2025; Knorr-Bremse's stake decreased, and significant 2024 financing occurred Major Shareholders - As of March 30, 2025, there are no shareholders known to beneficially own more than 5% of the company's outstanding ordinary shares[462] - The beneficial ownership of Knorr-Bremse Systeme für Schienenfahrzeuge GmbH has decreased from 48.1% as of June 21, 2023, to 3.35% currently[464] Related Party Transactions - In January 2024, the company entered into a private placement (PIPE) and a $6 million credit facility agreement with a global investment firm, which was also an investor in the PIPE[471][475] - The January 2024 PIPE raised $3.0 million through the sale of units consisting of ordinary shares, pre-funded warrants, and common warrants[472] - As of the report date, all warrants and pre-funded warrants from the January 2024 PIPE have been exercised, resulting in gross proceeds of approximately $5.25 million[474] Item 8. Financial Information Full financial statements are in Item 18; the company has never paid dividends and does not plan to in the foreseeable future - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[483] - Under Israeli law, dividend distributions are limited to the greater of retained earnings or earnings from the previous two years, and the board must determine that the payment will not jeopardize the company's ability to meet its obligations[484] Item 9. The Offer and Listing This section provides details about the trading of the company's securities. The ordinary shares and warrants of Rail Vision Ltd. began trading on the Nasdaq Capital Market on March 31, 2022 - The company's ordinary shares and warrants commenced trading on the Nasdaq Capital Market on March 31, 2022, under the ticker symbols "RVSN" and "RVSNW," respectively[487] Item 10. Additional Information Covers material contracts, exchange controls, and Israeli/U.S. tax implications, including PFIC risk for U.S. shareholders Taxation - The corporate tax rate in Israel is 23%. Capital gains for an Israeli resident company are also taxed at this rate[500][501] - A non-Israeli resident may be exempt from Israeli capital gains tax on the sale of shares listed on a non-Israeli stock exchange, provided certain conditions are met[528] - The company has not determined its PFIC status for 2024 or 2025. If classified as a PFIC, U.S. Holders could face adverse tax consequences. The company does not intend to provide the information necessary for U.S. Holders to make a QEF election[554][556] Item 11. Quantitative and Qualitative Disclosures About Market Risk Primary market risks include foreign exchange fluctuations (USD/NIS), liquidity, and equity price volatility impacting fundraising - The company's main market risk is foreign currency exchange risk due to a majority of its expenses being denominated in NIS while its functional currency is the U.S. dollar[571][572] - The company is exposed to liquidity risk but believes its existing funds are sufficient for at least the next twelve months of operations[573] - Equity price risk is present, as a decrease in the company's share price could make future fundraising more difficult. The SEPA with Yorkville may also impact the trading price[574][575] PART II Item 15. Controls and Procedures Management concluded disclosure controls and internal financial reporting controls were effective as of December 31, 2024 - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were effective[583] - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2024[584] Item 16G. Corporate Governance As a foreign private issuer, Rail Vision follows Israeli corporate governance, exempting it from certain Nasdaq Listing Rules - The company follows Israeli law for shareholder meeting quorum requirements, which allows for a quorum of two or more shareholders holding at least 25% of voting rights, and any number of shareholders for an adjourned meeting[598] - The company is exempt from Nasdaq's requirement for a majority of the board to be independent directors and instead complies with Israeli law regarding external directors[598] - Rail Vision follows Israeli law for shareholder approval of corporate actions, which differs from Nasdaq Rule 5635, particularly concerning equity issuances and compensation plans[602] Item 16K. Cybersecurity The company maintains an ISO 27001 certified cybersecurity program with internal management and audit committee oversight - The company has a cybersecurity risk management program that is integrated into its overall risk management system and is managed internally[603] - Oversight of cybersecurity is handled by the Chief Operating Officer, with support from a local subcontractor for CISO activities, and the audit committee is responsible for monitoring risk[604][605] - The company is ISO 27001 certified and is not aware of any material risks from cybersecurity threats that have materially affected its operations or financial condition[604][605] PART III Item 18. Financial Statements Audited FY2024 financials show $20.6M total assets, $2.9M liabilities, $17.7M equity, and a $30.7M net loss Balance Sheet Highlights (as of Dec 31, 2024) | Account | Amount (in thousands USD) | | :--- | :--- | | Assets | | | Cash and cash equivalents | 17,238 | | Total current assets | 19,703 | | Total Assets | 20,597 | | Liabilities & Equity | | | Total current liabilities | 2,678 | | Total Liabilities | 2,895 | | Total Shareholders' Equity | 17,702 | Statement of Comprehensive Loss Highlights (Year ended Dec 31, 2024) | Account | Amount (in thousands USD) | | :--- | :--- | | Revenues | 1,300 | | Gross profit | 450 | | Operating loss | (9,004) | | Net loss | (30,708) | | Basic and diluted loss per share | (1.85) | Statement of Cash Flows Highlights (Year ended Dec 31, 2024) | Activity | Amount (in thousands USD) | | :--- | :--- | | Net cash used in operating activities | (9,682) | | Net cash used in investing activities | (30) | | Net cash provided by financing activities | 23,918 | | Net increase in cash | 14,179 | - Subsequent to year-end, the company amended its SEPA to increase the commitment amount to $30.0 million and continued to issue shares under the agreement, raising an additional $7.5 million[725][766]