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 March 31, 2025 of approximately $14.8 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 June 30, 2025 of approximately $14.4 million reflects mostly those contracts.

Previous wording

As of the date of this Quarterly Report on Form 10-Q, we have not received a purchase order from the Fortune 500 medical company customer with respect to 2025, and we do not expect to receive such purchase order for 2025. As result, we fully derecognized the fulfillment asset and contract liability associated with the Fortune 500 medical company customer, with balances as of March 31, 2025 of $1,690 thousand and $957 thousand, respectively. Additionally, we recorded an inventory impairment in the amount of $203 thousand.

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 fulfillment asset and contract liability associated with this customer.

Previous wording

In February 2025, we closed a public offering, including the exercise of an over-allotment option granted to the underwriter in the public offering. The public offering and the over-allotment option exercise price was $6.50 per share. In the aggregate, we sold a total of 3,653,124 shares of common stock, generating gross proceeds of approximately $23.7 million, prior to the deduction of underwriting discounts, commissions and estimated offering expenses. Also in February 2025, our common stock began trading on the Nasdaq Capital Market under the symbol “ODYS”.

Current wording

In February 2025, we closed a public offering, including the exercise of an over-allotment option granted to the underwriter in the public offering. The public offering and the over-allotment option exercise price was $6.50 per share. In the aggregate, we sold a total of 3,653,124 shares of common stock, generating gross proceeds of approximately $23.7 million, prior to the deduction of underwriting discounts, commissions and estimated offering expenses. After deducting issuance costs, we received proceeds of approximately $20.9 million. Also in February 2025, our common stock began trading on the Nasdaq Capital Market under the symbol “ODYS”.

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 April and October 2024, the Islamic Republic of Iran targeted various sites in Israel with waves of drones, cruise missiles and ballistic missiles. Israel responded on both occasions with air defenses and retaliatory strikes against Iran.

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. 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.

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. 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 Israeli 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 two 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, 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.

Previous wording

Conversely, as a result of the intensive flight hours flown by all Israeli Air Force platforms as a result of the war and an enhanced Israel Ministry of Defense budget, we have experienced a growing interest in our technology from Israeli government agencies and R&D programs, which may lead to more rapid assimilation of our technology into relevant platforms than we had anticipated prior to the commencement of the war, positively affecting on our business activity. For additional information, see “Risks Related to our Operations in Israel–Our headquarters and other significant operations are located in Israel and, therefore, our results may be adversely affected by political, economic and military instability in Israel” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

Conversely, as a result of the intensive flight hours flown by all Israeli Air Force platforms as a result of the war and an enhanced Israel Ministry of Defense budget, we have experienced a growing interest in our technology from Israeli clients, including government agencies and R&D programs, which may lead to more rapid assimilation of our technology into relevant platforms than we had anticipated prior to the commencement of the war, positively affecting on our business activity. For additional information, see “Risks Related to our Operations in Israel–Our headquarters and other significant operations are located in Israel and, therefore, our results may be adversely affected by political, economic and military instability in Israel” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

For the three months ended March 31, 2025, we generated revenues of $2,065,000, an increase of $1,878,000, or 1,004%, compared to revenues of $187,000 for the three months ended March 31, 2024.

Current wording

For the six months ended June 30, 2025, we generated revenues of $2,427 thousand, an increase of $1,059 thousand, or 77%, compared to $1,368 thousand for the six months ended June 30, 2024.

Previous wording

The increase in revenue was primarily due to the full derecognition of the contract liability associated with the Fortune 500 medical company customer, in the amount of $1,690 thousand, as described in Note 6a(1) to our interim consolidated financial statements for the three months ended March 31, 2025, and to an increase in revenues from our vision-based platform solutions for PdM and CBM.

Current wording

The increase in revenue was primarily due to the full derecognition of the contract liability associated with the Fortune 500 medical company customer, in the amount of $1,690 thousand, as described in Note 6a(1) to our interim consolidated financial statements for the six months ended June 30, 2025, and to an increase in revenues from our vision-based platform solutions for PdM and CBM. The increase in revenue was partially offset by decrease in the number of units sold and supplied to the Fortune 500 medical company customer due to the absence of a purchase order for 2025, as described in Note 6a(1) to our interim consolidated financial statements for the six months ended June 30, 2025.

Previous wording

Cost of revenues for the three months ended March 31, 2025 was $1,527,000, an increase of $1,117,000, or 272%, compared to cost of revenues of $410,000 for the three months ended March 31, 2024.

Current 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.

Previous wording

The increase in cost of revenues was primarily due to the full derecognition of the fulfillment asset associated with the Fortune 500 medical company customer, in the amount of $957 thousand, and to the recognition of an inventory impairment of $203 thousand, as described in Note 6a(1) to our interim consolidated financial statements for the three months ended March 31, 2025.

Current wording

The increase in cost of revenues was primarily due to the full derecognition of the fulfillment asset associated with the Fortune 500 medical company customer, in the amount of $957 thousand, to the recognition of an inventory impairment of $203 thousand, as described in Note 6a(1) to our interim consolidated financial statements for the six months ended June 30, 2025, and to an increase in revenues from our vision-based platform solutions for PdM and CBM. The increase in cost of revenues was partially offset by decrease in the number of units sold and supplied to the Fortune 500 medical company customer due to the absence of a purchase order for 2025, as described in Note 6a(1) to our interim consolidated financial statements for thesix months ended June 30, 2025.

Previous wording

Gross profit for the three months ended March 31, 2025 was $538,000, an increase of $761,000, compared to gross loss of $223,000 for the three months ended March 31, 2024.

Current 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.

Previous wording

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

Current 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.

Previous wording

The increase in sales and marketing expenses was primarily driven by the Company’s 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.

Current 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.

Previous wording

Our primary uses of cash from operating activities have been for payroll expenses, research and development costs, manufacturing costs, marketing and promotional expenses, professional services costs and costs related to our facilities. We expect that cash flows from operating activities will continue to increase due to an expected increase in the expenses of our business and our working capital requirements.

Current wording

Our primary uses of cash used in operating activities have been for payroll expenses, research and development costs, manufacturing costs, marketing and promotional expenses, professional services costs and costs related to our facilities. We expect that cash flows from operating activities will continue to increase due to an expected increase in the expenses of our business and our working capital requirements.

Previous wording

The following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):

Current wording

The following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars in thousands):

Previous wording

During the three months ended March 31, 2024, cash used in operating activities was $1.2 million, consisting of net loss of $3.1 million, a non-cash benefit of $0.4 million and a favorable net change in operating assets and liabilities of $1.5 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 flows from changes in account receivable.

Current 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.

Previous wording

During the three months ended March 31, 2025, cash used in operating activities was $2.2 million, consisting of net loss of $4.3 million, a non-cash benefit of $0.9 million and a favorable net change in operating assets and liabilities of $1.2 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 account receivable, inventory, compensation expenses and fulfillment asset, partially offset by cash outflows from changes in current and non-current liabilities.

Current 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.

Previous wording

During the three months ended March 31, 2025, cash provided by financing activities was $21 million, consisting of cash proceeds from issuance of shares in our public offering that closed in February 2025.

Current 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.

Previous wording

The following table summarizes our results of operations for the three months period ended March 31, 2025 and 2024, together with the changes in those items in dollars and as a percentage:

Current wording

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

Previous wording

Sales and marketing expenses for the three months ended March 31, 2025 were $396,000, an increase of $162,000, or 69%, compared to $234,000 for the three months ended March 31, 2024.

Current 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.

Previous wording

We incurred an operating loss of $4,560,000 for the three months ended March 31, 2025, an increase of $1,196,000, or 36%, compared to operating loss of $3,364,000 for the three months ended March 31, 2024.

Current 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.

Previous wording

During the three months ended March 31, 2024, cash used in investing activities was $22,000, consisting of purchase of property and equipment.

Current 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.

Previous wording

Our backlog as of March 31, 2025 was approximately $14.8 million compared to approximately $15.0 million as of December 31, 2024.

Current wording

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

Previous wording

As of March 31, 2025, we had cash and cash equivalents and restricted cash of $37.2 million compared to cash and cash equivalents and restricted deposit of $18.5 million as of December 31, 2024. In addition, as of March 31, 2025, we incurred an accumulated deficit of $50.2 million compared to $ 46 million as of December 31, 2024.

Current 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.

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 March 31, 2025 were approximately $1 million. For additional details regarding our lease, see Note 3 to our interim consolidated financial statements for the three months ended March 31, 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 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.