20-F: Femto Technologies Inc. Reports Financial Results for Year Ended December 31, 2024

Femto Technologies Inc. reports a net loss of $47.59 million for the year ended December 31, 2024, amid ongoing war in Israel and strategic shifts in its cannabis business.

Summary

• Femto Technologies Inc. reported a net loss of $47.59 million for the fiscal year ended December 31, 2024, compared to a net loss of $18.49 million in 2023.
• The company's revenue decreased to $998,839 in 2024 from $1.07 million in 2023, primarily due to lower software license and development revenues.
• Cost of revenue increased to $848,137 in 2024 from $678,305 in 2023, mainly due to higher subcontractor expenses.
• General and administrative expenses increased to $1.99 million in 2024 from $1.25 million in 2023, driven by higher compensation to senior management and directors.
• Research and development expenses increased to $2.58 million in 2024 from $836,833 in 2023, related to the Sensera Device development.
• The company recognized a loss of $28.86 million from the change in fair value of derivative warrant liabilities in 2024.
• Impairment losses decreased to $8.2 million in 2024 from $13.14 million in 2023, due to impairment of intangible assets.
• The company's cash balance as of December 31, 2024, was $4.61 million, compared to $3.11 million in 2023.
• The company completed a private placement in February 2025, raising approximately $17 million.
• The company has suspended activities related to the construction of its planned cannabis growing facility due to negative changes in the medical cannabis market and the ongoing war in Israel.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to increased net losses, decreased revenue, and the suspension of the cannabis growing facility project. However, the recent capital raise provides some financial stability.

Positives

• The company's cash balance increased to $4.61 million as of December 31, 2024, compared to $3.11 million in 2023.
• The company completed a private placement in February 2025, raising approximately $17 million.
• Foreign exchange gain was $431,240 compared to a loss of $76,469 for the same period in 2023, mainly due to gain from term deposits in USD.
• Finance income were $170,433 income compared with $314 for the same period in 2023, mainly due interest income from term deposits.

Negatives

• The company reported a net loss of $47.59 million for the year ended December 31, 2024.
• Revenue decreased to $998,839 in 2024 from $1.07 million in 2023.
• Cost of revenue increased to $848,137 in 2024 from $678,305 in 2023.
• General and administrative expenses increased to $1.99 million in 2024 from $1.25 million in 2023.
• The company recognized a loss of $28.86 million from the change in fair value of derivative warrant liabilities in 2024.
• Impairment losses were $8.2 million compared to $13.14 million for the same period in 2023 due to impairment of our intangible assets in 2023.

Risks

• The company's operations are conducted in Israel, and the ongoing war with Hamas may affect its operations.
• The company is dependent on a single client for the majority of its current revenues.
• The company's cannabis business is dependent on obtaining the final license to engage in medical cannabis from the MCU.
• The company relies on its management and needs additional key personnel to grow its business.
• The market price of the company's subordinate voting shares may be volatile.

Future Outlook

The company anticipates launching the Sensera product in the second quarter of 2025, assuming no further deterioration in the security situation in Israel. There will be a significant delay in generating cash flow and income from the company's operations in 2025.

Industry Context

The document indicates significant negative changes in the medical cannabis market, particularly in Israel, including consolidation among growing farms and closure of farms due to economic unfeasibility. The ongoing war in Israel has also affected the agricultural sector.

Comparison to Industry Standards

• The document mentions that the global gynecology devices market was worth $10.8 billion in 2021 and is estimated to exceed $19.5 billion by 2028, with a CAGR of approximately 10.3 percent.
• The document mentions that, according to the Brightfield Group, sales of CBD products could reach $11 billion by 2027.

Related Party Transactions

• During the fiscal year ended December 31, 2024, the Company paid management, consulting and director fees in the aggregate amount of $5,124,063 to its President, CEO, CFO, CTO and three directors.
• As at December 31, 2024, $232,484 was owed to directors of the Company for management, consulting and director fees.

Stakeholder Impact

• Shareholders may experience volatility in the market price of the company's subordinate voting shares.
• Employees may be affected by the company's decision to suspend the construction of the cannabis growing facility.
• Customers may be affected by the company's ability to continue providing its CRM software and services.

Next Steps

• The company intends to revisit the suspension of the cannabis growing facility construction in April 2025.
• The company plans to go to market with the Sensera device in the second quarter of 2025.

Key Dates

Keywords

Femto Technologies, financial results, net loss, revenue, Sensera Device, CRM software, cannabis, Israel, warrants, private placement