Odysight.ai Inc.

Previous wording

Odysightsolutions are already deployed in the aviation and medical sectors. Our customers include the Israeli Air Force, the Israeli Ministry of Defense, France-based Safran Aircraft Engines, a global international defense contractor, a leading Fortune 500 medical company as well as NASA, who came back to us for a repeat order. Historically, our revenue stream has been derived mainly from the medical sector. We have secured several contracts for our PdM and CBM systems with major government clients and defense and aviation companies and our backlog as of June 30, 2025 of approximately $14.4 million reflects mostly those contracts.

Current wording

Odysightsolutions are already deployed in the aviation and medical sectors. Our customers include the Israeli Air Force, the Israeli Ministry of Defense, France-based Safran Aircraft Engines, a global international defense contractor, a leading Fortune 500 medical company as well as NASA, who came back to us for a repeat order. Historically, our revenue stream has been derived mainly from the medical sector. We have secured several contracts for our PdM and CBM systems with major government clients and defense and aviation companies and our backlog as of September 30, 2025 of approximately $14.2 million reflects mostly those contracts.

Previous wording

As we have not received a purchase order for 2025 from the Fortune 500 medical company customer and do not expect to receive such order, we decided, during the first quarter of 2025, to fully derecognize the fulfillment asset and contract liability associated with this customer.

Current wording

As we have not received a purchase order for 2025 from the Fortune 500 medical company customer and do not expect to receive such order, we decided, during the first quarter of 2025, to fully derecognize the fulfilment asset and contract liability associated with this customer.

Previous wording

On October 7, 2023, the Hamas terrorist organization launched a series of deadly terror attacks on civilian and military targets skirting the Gaza Strip in the southern part of Israel and fired rockets on many of the communities in southern and central Israel. Following the attack, Israel’s security cabinet declared war and commenced a military campaign in Gaza against Hamas. Since the outbreak of the war, the Hezbollah terrorist organization has regularly fired rockets into northern Israel and, in October 2024, Israel invaded southern Lebanon in response to these attacks. On November 27, 2024, Israel and Lebanon agreed to a ceasefire, the result of which is uncertain. During the course of the war, other terrorist organizations have fired rockets into Israel, such as various rebel militia groups in Syria and Iraq and the Houthi movement, which controls parts of Yemen. The Houthis movement has also attacked commercial shipping vessels in the Gulf of Aden and Red Sea. In addition, following two direct attacks by Iran on Israel in 2024 involving hundreds of drones and missiles, the two countries fought a 12-day war in June 2025 that was triggered by large-scale preemptive Israeli airstrikes on Iranian nuclear and military sites. Iran retaliated with significant ballistic missile and drone attacks on Israel, leading to direct U.S. military intervention against Iranian nuclear sites before a U.S.-brokered ceasefire was declared.

Current wording

On October 7, 2023, the Hamas terrorist organization launched a series of deadly terror attacks on civilian and military targets skirting the Gaza Strip in the southern part of Israel and fired rockets on many of the communities in southern and central Israel. Following the attack, Israel’s security cabinet declared war and commenced a military campaign in Gaza against Hamas. Following the outbreak of the war, the Hezbollah terrorist organization regularly fired rockets into northern Israel and, in October 2024, Israel invaded southern Lebanon in response to these attacks. On November 27, 2024, Israel and Lebanon agreed to a ceasefire, the result of which is uncertain. During the course of the war, other terrorist organizations have fired rockets into Israel, such as various rebel militia groups in Syria and Iraq and the Houthi movement, which controls parts of Yemen. The Houthis movement has also attacked commercial shipping vessels in the Gulf of Aden and Red Sea. In addition, following two direct attacks by Iran on Israel in 2024 involving hundreds of drones and missiles, the two countries fought a 12-day war in June 2025 that was triggered by large-scale preemptive Israeli airstrikes on Iranian nuclear and military sites. Iran retaliated with significant ballistic missile and drone attacks on Israel, leading to direct U.S. military intervention against Iranian nuclear sites before a U.S.-brokered ceasefire was declared. As of October 9, 2025, Israel and Hamas entered into a ceasefire agreement calling for a permanent end of the war. However, there are no assurances that such as agreement will hold. While the conflict has created heightened security concerns, disruptions to business operations and economic instability, the ceasefire may contribute to improved regional stability. However, the security situation remains fluid, and any renewed military actions, restrictions, or government-imposed measures could adversely affect our operations, supply chains and financial condition.

Previous wording

The war has had significant economic, military and social consequences to Israel. To date the war has not had a material adverse effect on our business. While we have offices in Omer and Ramat Gan, Israel, neither of our sites is located near Israel’s relevant borders where the main impact of the war has been felt. Nevertheless, we have experienced some minor disruptions to our routine work, including some difficulties in traveling outside of Israel and occasional rocket fire on the municipalities where our offices are located, requiring our employees to take temporarily shelter for a few minutes at a time in on-site safe rooms. Pursuant to instructions from Israel’s Home Front Command, the Company’s offices were closed on certain days during the war with Iran. In addition, several of our executives and employees, including company officers such as our CEO, were called up to military reserve duty. As of the date of this Quarterly Report on Form 10-Q, our CEO is subject to military reserve duty a few days a month. We have taken various measures to mitigate the effects of the war, including adopting work-from-home measures, increased employee overtime and third-party outsourcing where needed, and reviewing our business continuity plan. In addition, with the backdrop of the ongoing conflict, some of our clients and potential clients have not prioritized conducting transactions with us, and the war may have caused some delays in their finalizing purchase orders. We do not believe that such delays have had a material impact on our business. The war has also increased negative sentiments regarding Israel and Israeli companies in the international community. For example, Israeli defense companies were initially banned from participating in prestigious industry conferences in France during 2024; however, both bans were later overturned by French courts and did not impact our participation in such conferences.

Current wording

The war has had significant economic, military and social consequences to Israel. To date the war has not had a material adverse effect on our business. While we have offices in Omer and Ramat Gan, Israel, neither of our sites is located near Israel’s relevant borders where the main impact of the war has been felt. Nevertheless, we have experienced some minor disruptions to our routine work, including some difficulties in traveling outside of Israel and occasional rocket fire on the municipalities where our offices are located, requiring our employees to take temporarily shelter for a few minutes at a time in on-site safe rooms. Pursuant to instructions from Israel’s Home Front Command, the Company’s offices were closed on certain days during the war with Iran. In addition, several of our executives and employees were called up to military reserve duty, including company officers such as our CEO, who until recent months was subject to military reserve duty a few days a month. We have taken various measures to mitigate the effects of the war, including adopting work-from-home measures, increased employee overtime and third-party outsourcing where needed, and reviewing our business continuity plan. In addition, with the backdrop of the ongoing conflict, some of our clients and potential clients have not prioritized conducting transactions with us, and the war may have caused some delays in their finalizing purchase orders. We do not believe that such delays have had a material impact on our business. The war has also increased negative sentiments regarding Israel and Israeli companies in the international community. For example, Israeli defense companies were initially banned from participating in prestigious industry conferences in France during 2024; however, both bans were later overturned by French courts and did not impact our participation in such conferences.

Previous wording

The following table summarizes our results of operations for the six months period ended June 30, 2025 and 2024, together with the changes in those items in dollars in thousands and as a percentage:

Current wording

The following table summarizes our results of operations for the nine months period ended September 30, 2025 and 2024, together with the changes in those items in dollars in thousands and as a percentage:

Previous wording

Cost of revenue is primarily comprised of cost of personnel, certain allocated expenses related to facilities, logistics and quality control.

Current wording

Cost of revenues is primarily comprised of cost of personnel, certain allocated expenses related to facilities, logistics and quality control.

Previous wording

Cost of revenues for the six months ended June 30, 2025 was $1,756 thousand, an increase of $679 thousand, or 63%, compared to cost of revenues of $1,077 thousand for the six months ended June 30, 2024.

Current wording

Cost of revenues for the nine months ended September 30, 2025 was $1,882 thousand, a decrease of $82 thousand, or 4%, compared to cost of revenues of $1,964 thousand for the nine months ended September 30, 2024.

Previous wording

Gross profit for the six months ended June 30, 2025, was $671 thousand, an increase of $380 thousand, or 131%, compared to gross profit of $291 thousand for the six months ended June 30, 2024.

Current wording

Gross profit for the nine months ended September 30, 2025, was $694 thousand, a decrease of $2 thousand, compared to gross profit of $696 thousand for the nine months ended September 30, 2024.

Previous wording

The change in gross profit was due to an increase in revenues, partially offset by an increase in cost of revenues, as described above.

Current wording

The decrease in cost of revenues was due to the decrease in revenues partially offset by the decrease in cost of revenues, as described above.

Previous wording

The increase in sales and marketing expenses was primarily driven by our efforts to penetrate new markets and enhance product visibility. This led to higher payroll and related expenses associated with the recruitment of new employees, an increase in stock-based compensation due to newly granted options and additional expenses resulting from the engagement of new marketing consultants and participation in various exhibitions.

Current wording

The increase in sales and marketing expenses was primarily driven by our enhanced selling and marketing activity, including efforts to penetrate new markets and verticals, and enhance product visibility. This led to higher payroll and related expenses associated with the recruitment of new employees and an increase in additional expenses resulting from the engagement of new marketing consultants.

Previous wording

We incurred an operating loss of $8,998 thousand for the six months ended June 30, 2025, an increase of $3,270 thousand or 57%, compared to operating loss of $5,728 thousand for the six months ended June 30, 2024.

Current wording

We incurred an operating loss of $13,705 thousand for the nine months ended September 30, 2025, an increase of $4,961 thousand or 57%, compared to operating loss of $8,744 thousand for the nine months ended September 30, 2024.

Previous wording

The increase in operating loss was due to increases in research and development expenses, general and administrative expenses and sales and marketing expenses, each as described above, partially offset by an increase in gross profit.

Current wording

The increase in operating loss was due to increases in research and development expenses, general and administrative expenses and sales and marketing expenses, each as described above.

Previous wording

During the six months ended June 30, 2025, cash used in operating activities was $6.4 million, consisting of net loss of $8.3 million, partially offset by a favorable net change in operating assets and liabilities of $0.2 million and a non-cash benefit of $1.7 million. Our non-cash benefit consisted primarily of non-cash charges for stock-based compensation. The net change in our operating assets and liabilities primarily reflects cash inflows from changes in accounts receivable and a decrease in contract fulfillment assets, partially offset by outflows from changes in current and non-current other assets and a decrease in current and non-current contract liabilities.

Current wording

During the nine months ended September 30, 2025, cash used in operating activities was $9.8 million, consisting of net loss of $12.8 million, partially offset by a favorable net change in operating assets and liabilities of $0.3 million and a non-cash benefit of $2.6 million. Our non-cash benefit consisted primarily of non-cash charges for stock-based compensation. The net change in our operating assets and liabilities primarily reflects cash inflows from changes in accounts receivable and a decrease in contract fulfilment assets, partially offset by outflows from changes in current and non-current contract liabilities.

Previous wording

During the six months ended June 30, 2024, cash used in operating activities was $3.3 million, consisting of net loss of $5.3 million, partially offset by a favorable net change in operating assets and liabilities of $0.9 million and a non-cash benefit of $1.1 million. Our non-cash benefit consisted primarily of non-cash charges for stock-based compensation. The net change in our operating assets and liabilities primarily reflects cash outflows from changes in contract liability and other current assets, partially offset by inflows from changes in accounts payables and other accounts payables.

Current wording

During the nine months ended September 30, 2024, cash used in operating activities was $5.5 million, consisting of net loss of $8.2 million, partially offset by a favorable net change in operating assets and liabilities of $1 million and a non-cash benefit of $1.7 million. Our non-cash benefit consisted primarily of non-cash charges for stock-based compensation. The net change in our operating assets and liabilities primarily reflects cash inflows from changes in accounts receivable and accrued compensation expenses, partially offset by outflows from changes in current and non-current other assets and contract liabilities.

Previous wording

During the six months ended June 30, 2025, cash provided by investing activities was $0.3 million, attributable mainly to a withdrawal, net of short-term deposits.

Current wording

During the nine months ended September 30, 2025, net cash provided by investing activities was $0.3 million, consisting mainly of a withdrawal of short-term deposits.

Previous wording

For the three months ended June 30, 2024, net cash flows provided by investing activities was $8 million, attributable mainly to a withdrawal, net on short-term deposits.

Current wording

During nine months ended September 30, 2024, net cash flows provided by investing activities was $8 million, consisting mainly of a withdrawal of short-term deposits.

Previous wording

During the six months ended June 30, 2025, cash provided by financing activities was $21.1 million, consisting of cash proceeds from issuance of shares, net of issuance costs and proceeds from options exercise.

Current wording

During the nine months ended September 30, 2025, cash provided by financing activities was $21.1 million, consisting of cash proceeds from issuance of shares, net of issuance costs and proceeds from options exercise.

Previous wording

For the three months ended June 30, 2025, we generated revenues of $362 thousand, a decrease of $819 thousand, or 69%, compared to $1,181 thousand for the three months ended June 30, 2024.

Current wording

For the three months ended September 30, 2025, we generated revenues of $149 thousand, a decrease of $1,143 thousand, or 88%, compared to $1,292 thousand for the three months ended September 30, 2024.

Previous wording

The decrease in revenues was primarily attributable to the decrease in revenues from the Fortune 500 medical company customer, partially offset by an increase in revenues from our vision-based platform solutions for PdM and CBM.

Current wording

The decrease in revenues was primarily attributable to the decrease in revenues from the Fortune 500 medical company customer.

Previous wording

Cost of revenue is primarily comprised of cost of personnel, certain allocated expenses related to facilities, logistics and quality control.

Current wording

Cost of revenues is primarily comprised of cost of personnel, certain allocated expenses related to facilities, logistics and quality control.

Previous wording

Cost of revenues for the three months ended June 30, 2025, was $229 thousand, a decrease of $438 thousand, or 66%, compared to cost of revenues of $667 thousand for the three months ended June 30, 2024.

Current wording

Cost of revenues for the three months ended September 30, 2025, was $126 thousand, a decrease of $761 thousand, or 86%, compared to cost of revenues of $887 thousand for the three months ended September 30, 2024.

Previous wording

The decrease in cost of revenues was mainly due to decrease in revenues, as described above.

Current wording

The decrease in cost of revenues was mainly due to the decrease in revenues, as described above.

Previous wording

Gross profit for the three months ended June 30, 2025, was $133 thousand, a decrease of $381 thousand, or 74%, as compared to the three months ended June 30, 2024.

Current wording

Gross profit for the three months ended September 30, 2025, was $23 thousand, a decrease of $382 thousand, or 94%, as compared to the three months ended September 30, 2024.

Previous wording

The change in gross profit was due to both a decrease in revenues and a decrease in cost of revenues, as described above.

Current wording

The change in gross profit was due to both the decrease in revenues and the decrease in cost of revenues, as described above.

Previous wording

The increase in research and development expenses was mainly due to the development of new products and the resulting increase in payroll and related expenses for new employees’ recruitment, an increase in stock-based compensation from new option grants and procuring materials and services of subcontractors for Industry 4.0 projects.

Current wording

The increase in research and development expenses was mainly due to the development of new products and the resulting increase in payroll and related expenses for new employees’ recruitment and an increase in stock-based compensation from new option grants.

Previous wording

Research and development expenses for the three months ended June 30, 2025 were $2,356 thousand, an increase of $948 thousand, or 67%, compared to $1,408 thousand for the three months ended June 30, 2024.

Current wording

Sales and marketing expenses for the three months ended September 30, 2025, were $580 thousand, an increase of $233 thousand, or 67%, compared to $347 thousand for the three months ended September 30, 2024.

Previous wording

The increase in sales and marketing expenses was primarily driven by tour efforts to penetrate new markets and enhance product visibility. This led to higher payroll and related expenses associated with the recruitment of new employees, an increase in stock-based compensation due to newly granted options and additional expenses resulting from the engagement of new marketing consultants and participation in various exhibitions.

Current wording

The increase in sales and marketing expenses was primarily driven by our enhanced selling and marketing activity, including efforts to penetrate new markets and verticals and enhance product visibility. This led to higher payroll and related expenses associated with the recruitment of new employees and additional expenses resulting from the engagement of new marketing consultants.

Previous wording

The increase in general and administrative expenses was primarily due toan increase in stock-based compensation from new option grants.

Current wording

The increase in general and administrative expenses was primarily due to an increase in stock-based compensation from new option grants and an increase in professional services costs.

Previous wording

We incurred an operating loss of $4,438 thousand for the three months ended June 30, 2025, an increase of $2,074 thousand, or 88%, compared to operating loss of $2,364 thousand for the three months ended June 30, 2024.

Current wording

We incurred an operating loss of $4,707 thousand for the three months ended September 30, 2025, an increase of $1,691 thousand, or 56%, compared to operating loss of $3,016 thousand for the three months ended September 30, 2024.

Previous wording

The increase in operating loss was due to a decrease in gross profit and increases in research and development expenses, general and administrative expenses and sales and marketing expenses, each as described above.

Current wording

The increase in operating loss was due to decreases in gross profit and increases in research and development expenses, sales and marketing expenses and general and administrative expenses, each as described above.

Previous wording

During the three months ended June 30, 2025, cash used in operating activities was $4.2 million, consisting of net loss of $4.1 million, an unfavorable net change in operating assets and liabilities of $1.0 million and a non-cash benefit of $0.9 million. Our non-cash benefit consisted primarily of non-cash charges of $0.8 million for stock-based compensation. The net change in our operating assets and liabilities primarily reflects cash outflows from changes in accounts receivable, lease liability, current and non-current assets and accrued compensation.

Current wording

During the three months ended September 30, 2025, cash used in operating activities was $3.4 million, consisting of net loss of $4.4 million and a non-cash benefit of $1 million. Our non-cash benefit consisted primarily of non-cash charges of $0.9 million for stock-based compensation.

Previous wording

During the three months ended June 30, 2024, cash used in operating activities was $2.1 million, consisting of net loss of $2.2 million, an unfavorable net change in operating assets and liabilities of $0.6 million and a non-cash benefit of $0.7 million. Our non-cash benefit consisted primarily of non-cash charges of $0.5 million for stock-based compensation. The net change in our operating assets and liabilities primarily reflects cash outflows from changes in accounts receivable.

Current wording

During the three months ended September 30, 2024, cash used in operating activities was $2.2 million, consisting of net loss of $2.9 million, a favorable net change in operating assets and liabilities of $0.1 million and a non-cash benefit of $0.5 million. Our non-cash benefit consisted primarily of non-cash charges of $0.5 million for stock-based compensation.

Previous wording

For the three months ended June 30, 2025, net cash flows used in investing activities was $3 thousand, attributable to a purchase of property and equipment.

Current wording

For the three months ended September 30, 2025, net cash flows used in investing activities was $11 thousand, attributable to a purchase of property and equipment.

Previous wording

For the three months ended June 30, 2025, net cash flows provided by financing activities was $34 thousand, consisting of proceeds from options exercise, partially offset by issuance expenses.

Current wording

For the three months ended September 30, 2025, net cash flows provided by financing activities was $1 thousand, consisting of proceeds from options exercise, partially offset by issuance expenses.

Previous wording

Our backlog as of June 30, 2025 was approximately $14.4 million compared to approximately $15.0 million as of December 31, 2024.

Current wording

Our backlog as of September 30, 2025 was approximately $14.2 million compared to approximately $15.0 million as of December 31, 2024.

Previous wording

As of June 30, 2025, we had cash and cash equivalents and restricted cash of $33.2 million compared to cash and cash equivalents and restricted deposit of $18.5 million as of December 31, 2024. In addition, as of June 30, 2025, we incurred an accumulated deficit of $54.3 million compared to $46 million as of December 31, 2024.

Current wording

As of September 30, 2025, we had cash and cash equivalents and restricted cash of $29.8 million compared to cash and cash equivalents and restricted deposit of $18.5 million as of December 31, 2024. In addition, as of September 30, 2025, we incurred an accumulated deficit of $58.7 million compared to $46 million as of December 31, 2024.

Previous wording

Operating lease payments represent our commitment for future rent made leases for our offices in Israel and for vehicle leasing. The total future payments for our operating lease obligation as of June 30, 2025 were approximately $1 million. For additional details regarding our lease, see Note 3 to our interim consolidated financial statements for the six months ended June 30, 2025.

Current wording

Operating lease payments represent our commitment for future rent made leases for our offices in Israel and for vehicle leasing. The total future payments for our operating lease obligation as of September 30, 2025 were approximately $0.9 million. For additional details regarding our lease, see Note 3 to our interim consolidated financial statements for the nine months ended September 30, 2025.