Company Overview - Odysight.AI Inc. is a leading developer of AI systems for Predictive Maintenance (PdM) and Condition-Based Monitoring (CBM) [3] - The company specializes in video sensor-based solutions for critical systems in the aviation, transportation, and energy industries [3] - Odysight.AI leverages technologies from the medical industry to enhance its offerings [3] Upcoming Events - Einav Brenner, the Chief Financial Officer, will participate in the H.C. Wainwright 27th Annual Global Investment Conference from September 8–10, 2025, in New York City [1] - An on-demand company presentation will be available to registered attendees starting September 5, 2025, at 7:00 a.m. ET [2] - Attendees can submit questions directly to management through the conference platform [2] Investor Engagement - Investors can schedule one-on-one meetings through their H.C. Wainwright representative or by contacting Miri Segal [2]

[Company Overview](index=1&type=section&id=Company%20Overview) [About Odysight.ai](index=2&type=section&id=About%20Odysight.ai) Odysight.ai is a leading provider of Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) solutions, leveraging a visualization and AI platform with video sensor-based technologies for critical systems in aviation, transportation, and energy industries - Odysight.ai specializes in Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) using a visualization and AI platform[13](index=13&type=chunk) - The company provides video sensor-based solutions for critical systems across aviation, transportation, and energy industries, leveraging proven medical industry technologies[13](index=13&type=chunk) [Overall Key Highlights](index=1&type=section&id=Key%20highlights%20for%20the%20six%20months%20ended%20June%2030%2C2025) Odysight.ai reported **$2.4 million** in revenue and a net cash position of approximately **$33.2 million** as of June 30, 2025. The company successfully uplisted to the Nasdaq Capital Markets, was added to the Russell Microcap® Index, and achieved significant commercial milestones globally | Metric | Value (as of June 30, 2025) | | :----- | :-------------------------- | | Revenue (H1 2025) | $2.4 million | | Net Cash Position | $33.2 million | - Odysight.ai uplisted to the Nasdaq Capital Markets and was added to the Russell Microcap® Index[8](index=8&type=chunk) [Business Update & Strategic Developments](index=1&type=section&id=Business%20Update%20%26%20Strategic%20Developments) [CFO Commentary](index=1&type=section&id=Einav%20Brenner%2C%20Chief%20Financial%20Officer%20of%20Odysight.ai) The CFO highlighted deepened partnerships with tier-one customers and advanced the development and integration of their predictive maintenance system. This supports an ongoing strategic transition towards the aerospace and defense sectors, with key deployments including the Heron TP UAV and an agreement with a multinational technology group - Deepened partnerships with tier-one customers and advanced development/integration of predictive maintenance systems[3](index=3&type=chunk) - Ongoing strategic transition towards the aerospace and defense sectors, which may cause short-term revenue fluctuations[3](index=3&type=chunk) - System selected for deployment on the Heron TP - a Medium Altitude Long Endurance (MALE) unmanned aerial vehicle (UAV) - for the Israeli Ministry of Defense and Air Force[3](index=3&type=chunk) [Commercial Achievements](index=1&type=section&id=Strengthened%20global%20presence%20with%20commercial%20achievements) Odysight.ai strengthened its global presence by delivering a system for the Heron TP UAV, signing a strategic partnership with a multinational technology group for PHM system integration, receiving a purchase order from a European partner for industrial solutions, and partnering with Israel Railways to deploy PHM for enhanced railway safety - Delivered system for the Heron TP UAV platform with Israeli Ministry of Defense (MOD) and Israeli Air Force (IAF)[8](index=8&type=chunk) - Signed a strategic partnership with a multinational technology group to integrate Odysight's predictive health monitoring (PHM) system on several platforms[8](index=8&type=chunk) - Partnered with Israel Railways to deploy Odysight's PHM system to prevent derailments and enhance railway safety[8](index=8&type=chunk) [Financial Performance Analysis](index=1&type=section&id=Financial%20Performance%20Analysis) [Six Months Ended June 30, 2025](index=1&type=section&id=Financial%20highlights%20for%20the%20six%20months%20ended%20June%2030%2C%202025) For the first half of 2025, Odysight.ai's revenues significantly increased to **$2.4 million** from **$1.4 million** year-over-year, primarily driven by a Fortune 500 medical company contract. Gross profit more than doubled, and gross margin improved to **28%**. However, operating expenses rose to **$9.7 million** due to operational expansion and Nasdaq uplisting costs, leading to an increased net loss of **$8.3 million**. The cash balance notably increased to **$33.2 million**, bolstered by a public offering [Income Statement Highlights](index=1&type=section&id=Income%20Statement%20Highlights%20-%20Six%20Months) Revenues for the six months ended June 30, 2025, increased by **76.5%** year-over-year, primarily due to the full recognition of a Fortune 500 medical company contract. Gross profit more than doubled, and gross margin improved from **21%** to **28%**. Despite this, operating expenses rose significantly by **61.1%**, leading to a **56.0%** increase in net loss | Metric | H1 2025 (USD in thousands) | H1 2024 (USD in thousands) | YoY Change | | :---------------- | :------------------------- | :------------------------- | :--------- | | Revenues | 2,427 | 1,368 | +76.5% | | Cost of Revenues | 1,756 | 1,077 | +63.0% | | Gross Profit | 671 | 291 | +130.6% | | Gross Margin | 28% | 21% | +7 ppts | | Operating Expenses | 9,700 | 6,019 | +61.1% | | Net Loss | (8,340) | (5,344) | -56.0% | - Revenue increase primarily attributed to full recognition of approximately **$1.7 million** from a contract with a Fortune 500 medical company and increased revenues from vision-based platform solutions[4](index=4&type=chunk) - Operating expenses increased due to the expansion of the Company's operations, including new Industry 4.0 product development, market penetration efforts, and one-time Nasdaq uplisting expenses[9](index=9&type=chunk) [Cash Position](index=2&type=section&id=Cash%20Balance%20-%20Six%20Months) The company's cash balance significantly increased to **$33.2 million** as of June 30, 2025, up from approximately **$13.6 million** a year prior. This substantial increase was primarily driven by a U.S. underwritten public offering in February 2025, which generated approximately **$23.7 million** in gross proceeds | Metric | As of June 30, 2025 (USD in thousands) | As of June 30, 2024 (USD in thousands) | YoY Change | | :----------- | :----------------------------------- | :----------------------------------- | :--------- | | Cash Balance | 33,238 | 13,600 (approx) | +144.4% | - The significant increase in cash balance was driven by a U.S. underwritten public offering in February 2025, which generated approximately **$23.7 million** in gross proceeds[10](index=10&type=chunk) [Three Months Ended June 30, 2025](index=2&type=section&id=Financial%20highlights%20for%20three%20months%20ended%20June%2030%2C%202025) For the second quarter of 2025, revenues decreased significantly to **$0.4 million** from **$1.2 million** year-over-year, primarily due to reduced deliveries to a Fortune 500 medical company. Gross profit also declined, and gross margin slightly decreased to **37%**. Operating expenses increased to **$4.6 million**, resulting in a higher net loss of **$4.1 million** compared to the prior year's quarter [Income Statement Highlights](index=2&type=section&id=Income%20Statement%20Highlights%20-%20Three%20Months) Revenues for the three months ended June 30, 2025, decreased by **69.4%** year-over-year, primarily due to reduced deliveries to a key medical customer. Gross profit and margin also declined, while operating expenses increased by **58.6%**, leading to an **86.7%** larger net loss compared to the same period last year | Metric | Q2 2025 (USD in thousands) | Q2 2024 (USD in thousands) | YoY Change | | :---------------- | :------------------------- | :------------------------- | :--------- | | Revenues | 362 | 1,181 | -69.4% | | Cost of Revenues | 229 | 667 | -65.7% | | Gross Profit | 133 | 514 | -74.1% | | Gross Margin | 37% | 44% | -7 ppts | | Operating Expenses | 4,600 (approx) | 2,900 (approx) | +58.6% | | Net Loss | (4,075) | (2,182) | -86.7% | - The decrease in revenues was primarily attributable to a decrease in deliveries to the Fortune 500 medical company customer[11](index=11&type=chunk) - Operating expenses increased due to the expansion of the Company's operations, including the development of new Industry 4.0 products and efforts to penetrate new markets and enhance product visibility[12](index=12&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Interim Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) This section presents the unaudited interim condensed consolidated statements of operations for the six and three months ended June 30, 2025, and 2024, providing detailed figures for revenues, cost of revenues, gross profit, operating expenses (R&D, S&M, G&A), operating loss, financing income, and net loss | Metric (USD in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | REVENUES | 2,427 | 1,368 | 362 | 1,181 | | COST OF REVENUES | 1,756 | 1,077 | 229 | 667 | | GROSS PROFIT | 671 | 291 | 133 | 514 | | RESEARCH AND DEVELOPMENT EXPENSES | 4,843 | 2,975 | 2,356 | 1,408 | | SALES AND MARKETING EXPENSES | 1,024 | 459 | 628 | 225 | | GENERAL AND ADMINISTRATIVE EXPENSES | 3,802 | 2,585 | 1,587 | 1,245 | | OPERATING LOSS | (8,998) | (5,728) | (4,438) | (2,364) | | FINANCING INCOME, NET | 658 | 384 | 363 | 182 | | NET LOSS | (8,340) | (5,344) | (4,075) | (2,182) | [Interim Condensed Consolidated Balance Sheets](index=5&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides the unaudited interim condensed consolidated balance sheets as of June 30, 2025, and the audited balance sheets as of December 31, 2024, detailing the company's financial position including current and non-current assets, liabilities, and shareholders' equity | Metric (USD in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :------------------------ | :------------------------ | :-------------------------- | | **Assets** | | | | Cash and cash equivalents | 32,910 | 18,164 | | Total current assets | 34,885 | 20,787 | | Total non-current assets | 1,674 | 2,892 | | **TOTAL ASSETS** | **36,559** | **23,679** | | **Liabilities** | | | | Total current liabilities | 3,294 | 3,295 | | Total non-current liabilities | 661 | 2,140 | | **TOTAL LIABILITIES** | **3,955** | **5,435** | | **Shareholders' Equity** | | | | Additional paid-in capital | 86,901 | 64,205 | | Accumulated deficit | (54,314) | (45,974) | | **TOTAL SHAREHOLDERS' EQUITY** | **32,604** | **18,244** | | **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | **36,559** | **23,679** | [Additional Information & Disclosures](index=1&type=section&id=Additional%20Information%20%26%20Disclosures) [Backlog Definition and Disclaimer](index=1&type=section&id=Backlog) Backlog is defined as booked orders based on purchase orders or hard commitments not yet recognized as revenue, amounting to approximately **$14.4 million** as of June 30, 2025. It is presented for supplemental informational purposes only and is not a comprehensive indicator of future revenue or profitability, as orders may be cancelled or rescheduled - Backlog refers to booked orders based on purchase orders or hard commitments that have not yet been recognized as revenue[7](index=7&type=chunk)[15](index=15&type=chunk) - Backlog is not a comprehensive indicator of future revenue or profitability and should not be considered a substitute for GAAP financial measures, as orders can be cancelled or rescheduled by customers[7](index=7&type=chunk)[15](index=15&type=chunk) | Metric | Value (as of June 30, 2025) | | :----- | :-------------------------- | | Backlog | $14.4 million | [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Key risk factors include market acceptance, product delays, regulatory approvals, intense competition, product liability, manufacturing limitations, inability to attract personnel, intellectual property protection, reliance on single customers/suppliers, need for additional capital, cybersecurity, foreign jurisdiction risks, and political/economic instability in Israel - Statements in the news release are forward-looking and subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed or suggested[17](index=17&type=chunk) - Key risk factors include market acceptance of products, lengthy product delays, inability to secure regulatory approvals, intense competition, product liability claims, limited manufacturing capabilities, reliance on single customers/suppliers, need for additional capital, cybersecurity, foreign jurisdiction risks, and political/economic instability in Israel[17](index=17&type=chunk) [Company and Investor Contacts](index=3&type=section&id=Company%20Contact) This section provides contact information for Odysight.ai's Chief Financial Officer, Einav Brenner, and for Investor Relations, Miri Segal of MS-IR LLC, for any inquiries - Company Contact: Einav Brenner, CFO, info@odysight.ai[18](index=18&type=chunk) - Investor Relations Contact: Miri Segal, MS-IR LLC, msegal@ms-ir.com, Tel: +1-917-607-8654[18](index=18&type=chunk)

Core Insights - Odysight.ai Inc. reported financial results for the first half of 2025, showing significant revenue growth and strategic advancements in partnerships and technology deployment [1][4][3]. Financial Performance - Revenues for the six months ended June 30, 2025, were approximately $2.4 million, an increase from $1.4 million for the same period in 2024, primarily due to a $1.7 million contract with a Fortune 500 medical company [4]. - The cost of revenues increased to $1.8 million from $1.1 million, attributed to the same Fortune 500 contract and inventory impairment [5]. - Gross profit was $0.7 million with a gross margin of approximately 28%, compared to a gross profit of $0.3 million and a margin of 21% in the previous year [6]. - Operating expenses rose to $9.7 million from $6.0 million, driven by operational expansion and one-time uplisting expenses, resulting in a net loss of $8.3 million compared to $5.3 million in the prior year [9]. - As of June 30, 2025, the company had a net cash position of approximately $33.2 million, significantly up from $13.6 million a year earlier [10]. Strategic Developments - The company deepened partnerships with tier-one customers and advanced its predictive maintenance system, particularly in the aerospace and defense sectors [3]. - Notable achievements include the deployment of its system on the Heron TP UAV for the Israeli Ministry of Defense and a strategic partnership with a multinational technology group [7]. - The backlog as of June 30, 2025, was approximately $14.4 million, indicating strong future revenue potential [4][8]. Market Position and Future Outlook - Odysight.ai is positioned as a leader in the predictive maintenance and condition-based monitoring markets, leveraging its unique video sensor-based solutions across various industries [13]. - The company aims to expand its technology applications beyond aviation, with ongoing collaborations in defense, mining, agriculture, and transportation sectors [3][7].

Special Note Regarding Forward-Looking Statements [Forward-Looking Statements Disclosure](index=4&type=section&id=Forward-Looking%20Statements%20Disclosure) This section outlines the nature of forward-looking statements within the report, emphasizing that they are based on management's current expectations and involve known and unknown risks and uncertainties, listing various factors that could cause actual results to differ materially from these statements - **Forward-looking statements** are based on **management's current expectations**, estimates, forecasts, and projections, and are **not guarantees of future performance**, involving **known and unknown risks and uncertainties**[9](index=9&type=chunk) - Important factors that may cause **actual results to differ materially** include the **ability to scale operations**, **market acceptance** of vision-based sensor products, timing of future sales, ability to meet technical specifications, **supply chain factors**, **market adoption** of technologies, regulatory developments, **intellectual property rights**, personnel needs, **financial performance**, and **global economic environment**[10](index=10&type=chunk) - The company assumes **no obligation to update or revise** these **forward-looking statements** for any reason, even if new information becomes available in the future, **except as required by law**[12](index=12&type=chunk) PART I - FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited interim condensed consolidated financial statements, including the balance sheets, statements of comprehensive loss, statements of changes in shareholders' equity, and statements of cash flows, along with their accompanying notes, providing a detailed financial overview for the periods ended June 30, 2025, and December 31, 2024 [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The **consolidated balance sheets** show a **significant increase** in **total assets** and **shareholders' equity** as of June 30, 2025, compared to December 31, 2024, primarily driven by a **substantial rise** in **cash and cash equivalents** | Metric | June 30, 2025 (USD in thousands) | December 31, 2024 (USD in thousands) | | :-------------------------- | :------------------------------- | :--------------------------------- | | Cash and cash equivalents | 32,910 | 18,164 | | Total current assets | 34,885 | 20,787 | | Total non-current assets | 1,674 | 2,892 | | TOTAL ASSETS | 36,559 | 23,679 | | Total current liabilities | 3,294 | 3,295 | | Total non-current liabilities | 661 | 2,140 | | TOTAL LIABILITIES | 3,955 | 5,435 | | TOTAL SHAREHOLDERS' EQUITY | 32,604 | 18,244 | - **Cash and cash equivalents increased by $14,746 thousand** (**81.2%**) from December 31, 2024, to June 30, 2025[16](index=16&type=chunk) - **Total Shareholders' Equity increased by $14,360 thousand** (**78.7%**) from December 31, 2024, to June 30, 2025[20](index=20&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) The statements of operations and comprehensive loss show **increased revenues** for the six months ended June 30, 2025, compared to the prior year, but also a **significant rise** in **operating expenses**, leading to a **larger net loss** for both the three-month and six-month periods | Metric (USD in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | REVENUES | 2,427 | 1,368 | 362 | 1,181 | | COST OF REVENUES | 1,756 | 1,077 | 229 | 667 | | GROSS PROFIT | 671 | 291 | 133 | 514 | | RESEARCH AND DEVELOPMENT EXPENSES | 4,843 | 2,975 | 2,356 | 1,408 | | SALES AND MARKETING EXPENSES | 1,024 | 459 | 628 | 225 | | GENERAL AND ADMINISTRATIVE EXPENSES | 3,802 | 2,585 | 1,587 | 1,245 | | OPERATING LOSS | (8,998) | (5,728) | (4,438) | (2,364) | | NET LOSS | (8,340) | (5,344) | (4,075) | (2,182) | | Net loss per ordinary share (basic and diluted, USD) | (0.54) | (0.51) | (0.25) | (0.21) | - **Revenues** for the six months ended June 30, 2025, **increased by 77%** YoY to **$2,427 thousand**, while for the three months, they **decreased by 69%** YoY to **$362 thousand**[22](index=22&type=chunk) - **Operating loss** for the six months ended June 30, 2025, **increased by 57%** YoY to **$(8,998) thousand**, and for the three months, it **increased by 88%** YoY to **$(4,438) thousand**[22](index=22&type=chunk) [Interim Condensed Consolidated Statements of Changes in Shareholders' Equity](index=10&type=section&id=Statements%20of%20Stockholders'%20Equity) The statements of changes in shareholders' equity reflect a **substantial increase** in **additional paid-in capital** due to share issuances and **stock-based compensation**, alongside a growing **accumulated deficit** from **net losses**, resulting in a **significant increase** in **total shareholders' equity** by June 30, 2025 | Metric (USD in thousands) | Balance at January 1, 2025 | Stock based compensation | Issuance of shares, net of issuance cost | Options exercise | Net loss | Balance at June 30, 2025 | | :------------------------ | :------------------------- | :----------------------- | :--------------------------------------- | :--------------- | :------- | :----------------------- | | Common Stock | 13 | - | 4 | * | - | 17 | | Additional paid-in capital | 64,205 | 1,651 | 20,863 | 182 | - | 86,901 | | Accumulated Deficit | (45,974) | - | - | - | (8,340) | (54,314) | | Total Shareholders' equity | 18,244 | 1,651 | 20,867 | 182 | (8,340) | 32,604 | - **Additional paid-in capital increased significantly** from **$64,205 thousand** at January 1, 2025, to **$86,901 thousand** at June 30, 2025, **primarily due to issuance of shares** (net of issuance cost) of **$20,863 thousand** and **stock-based compensation** of **$1,651 thousand**[25](index=25&type=chunk) - The **accumulated deficit increased** from **$(45,974) thousand** at January 1, 2025, to **$(54,314) thousand** at June 30, 2025, reflecting the **net loss incurred** during the period[25](index=25&type=chunk) [Interim Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The **consolidated statements of cash flows** indicate **increased cash usage** in **operating activities** for the six months ended June 30, 2025, compared to the prior year, but a **substantial cash inflow** from **financing activities** in 2025, primarily from share issuance, **significantly boosting** the **cash and cash equivalents** balance | Metric (USD in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Net cash flows used in operating activities | (6,403) | (3,323) | (4,170) | (2,093) | | Net cash flows provided by (used in) investing activities | 280 | 7,970 | (3) | 7,992 | | Net cash flows provided by financing activities | 21,056 | - | 34 | - | | INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | 14,933 | 4,647 | (4,139) | 5,899 | | BALANCE OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF THE PERIOD | 33,238 | 13,552 | 33,238 | 13,552 | - **Net cash used in operating activities increased by 92.7%** for the six months ended June 30, 2025, to **$6,403 thousand**, compared to **$3,323 thousand** in the prior year[31](index=31&type=chunk) - **Net cash provided by financing activities** was **$21,056 thousand** for the six months ended June 30, 2025, **primarily from the issuance of shares**, a **significant increase** from zero in the prior year[31](index=31&type=chunk) [Notes to the Interim Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the interim condensed consolidated financial statements, covering the company's general information, accounting policies, lease agreements, equity transactions, revenue recognition, inventory, loss per share, commitments, and segment reporting [Note 1 – General](index=15&type=section&id=Note%201%20%E2%80%93%20General) This note provides background on **Odysight.ai Inc.**, its subsidiaries, and its core business of providing **vision-based platform solutions** for **Predictive Maintenance (PdM)** and **Condition Based Monitoring (CBM)** markets, including micro visualization technology for medical devices, also highlighting the company's **public offering** in February 2025, which generated approximately **$20.9 million** in **net proceeds**, and its listing on the **Nasdaq Capital Market** - **Odysight.ai Inc.** provides **vision-based platform solutions** for **Predictive Maintenance (PdM)** and **Condition Based Monitoring (CBM)** markets, utilizing video sensor-based solutions, embedded software, and AI algorithms[39](index=39&type=chunk) - In February 2025, the company closed a **public offering**, generating approximately **$20.9 million** in **net proceeds** after deducting issuance costs[40](index=40&type=chunk) - The company's **common stock** began trading on the **Nasdaq Capital Market** under the symbol '**ODYS**' on February 11, 2025, having previously been quoted on the OTCQB[41](index=41&type=chunk) [Note 2 – Basis of Presentation and Significant Accounting Policies](index=16&type=section&id=Note%202%20%E2%80%93%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note details the basis of presentation for the unaudited interim condensed financial statements, confirming adherence to **U.S. GAAP** and **SEC regulations**, addressing the company's **accumulated deficit** of approximately **$54.3 million** as of June 30, 2025, and its belief in sufficient cash resources for the next 12 months, while acknowledging the need for **additional funding** for future operations, and briefly mentioning the impact of the **ongoing war in Israel** - The unaudited interim condensed financial statements are prepared in accordance with **U.S. GAAP** for interim financial information and **SEC Regulation S-X**[47](index=47&type=chunk) - As of June 30, 2025, the Company **accumulated a deficit** of approximately **$54.3 million**[50](index=50&type=chunk) - Management believes **current cash and cash resources** will fund **operating plans** for at least the next 12 months, but **additional funding** will be required for future operations until profitability[50](index=50&type=chunk) [Note 3 – Leases](index=17&type=section&id=Note%203%20%E2%80%93%20Leases) This note outlines the company's **operating lease agreements** for office spaces in Omer and Ramat Gan, Israel, and for employee vehicles, providing details on **lease terms**, **monthly payments**, and supplemental cash flow information related to **operating leases**, along with the maturities of lease liabilities - The Company leases office space in Omer, Israel, with the original space lease extended until December 31, 2028, and an option to terminate after three years, with **monthly payments** of approximately **$7 thousand**[54](index=54&type=chunk)[55](index=55&type=chunk) - The Company leases office space in Ramat Gan, Israel, for 48 months starting July 1, 2023, with **monthly payments** of approximately **$25 thousand**, and part of this space is subleased for approximately **$8 thousand** per month[55](index=55&type=chunk)[56](index=56&type=chunk) | Operating leases (USD in thousands) | Amount | | :---------------------------------- | :----- | | Remainder of 2025 | 301 | | 2026 | 505 | | 2027 | 201 | | 2028 | 3 | | Total future lease payments | 1,010 | | Less imputed interest | (91) | | Total lease liability balance | 919 | [Note 4 – Other Current Liabilities](index=19&type=section&id=Note%204%20%E2%80%93%20Other%20Current%20Liabilities) This note details the composition of **other current liabilities**, which include **amounts due to government authorities**, **accrued expenses**, and **other payables**, showing a slight increase from December 31, 2024, to June 30, 2025 | Other Current Liabilities (USD in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------- | :------------ | :---------------- | | Government authorities | 85 | 79 | | Accrued expenses | 326 | 261 | | Other payables | 28 | 28 | | Total | 439 | 368 | [Note 5 – Equity](index=19&type=section&id=Note%205%20%E2%80%93%20Equity) This note provides comprehensive details on the company's **equity**, including **outstanding warrants**, private placements, the February 2025 **public offering** that raised **$20.9 million** net, and **stock-based compensation plans** (2020 and 2024 Share Incentive Plans), along with summaries of **stock option** and Restricted Stock Unit (RSU) activity - The company completed a U.S. underwritten **public offering** on February 12, 2025, issuing **3,653,124 shares of common stock** at **$6.50 per share**, generating **gross proceeds** of approximately **$23.7 million** and **net proceeds** of approximately **$20.9 million**[62](index=62&type=chunk) | Warrant | Issuance Date | Expiration Date | Exercise Price Per Share ($) | Number of Underlying Common Stocks | | :------------------ | :------------ | :-------------- | :--------------------------- | :--------------------------------- | | March 2021 Warrants | March 29, 2021 | March 31, 2026 | 10.35 | 2,469,156 | | March 2023 Warrants | March 16, 2023 | March 16, 2026 | 4.25 | 3,294,117 | | Stock Option Activity (Six months ended June 30, 2025) | Number of Options | Weighted average exercise price ($) | | :------------------------------------- | :---------------- | :---------------------------------- | | Outstanding at beginning of period | 3,227,234 | 3.78 |\n| Granted | 181,000 | 6.5 |\n| Exercised | (58,101) | 3.27 |\n| Forfeited | (28,336) | 4.09 |\n| Outstanding at end of period | 3,321,797 | 3.94 |\n| Vested at end of period | 2,035,607 | 3.52 | | Stock-based Payment Expenses (USD in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :---------------------------------------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Cost of revenues | (3) | 17 | - | 8 |\n| Research and development | 466 | 225 | 219 | 90 |\n| Sales and marketing expenses | 202 | 95 | 99 | 45 |\n| General and administrative | 986 | 626 | 527 | 320 |\n| Total expenses | 1,651 | 963 | 845 | 463 | [Note 6 – Revenues](index=24&type=section&id=Note%206%20%E2%80%93%20Revenues) This note details the disaggregation of revenue, **contract fulfillment assets**, and **contract liabilities**, highlighting the **derecognition of a contract** with a **Fortune 500 medical company customer** due to the absence of a 2025 purchase order, and reports **Remaining Performance Obligations (RPO)** of approximately **$14.4 million** as of June 30, 2025 | Contract Balances (USD in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Contract fulfillment assets | - | 1,017 | | Contract liabilities | 279 | 2,075 | - The company fully **derecognized the fulfillment asset** (**$1,690 thousand**) and **contract liability** (**$957 thousand**) associated with a **Fortune 500 medical company customer** in Q1 2025 due to not receiving a purchase order[82](index=82&type=chunk) - **Remaining Performance Obligations (RPO)** amounted to approximately **$14.4 million** as of June 30, 2025[81](index=81&type=chunk) [Note 7 – Inventory](index=25&type=section&id=Note%207%20%E2%80%93%20Inventory) This note outlines the composition of **inventory**, which was **fully impaired** for the six months ended June 30, 2025, due to the **derecognition of the contract** with the **Fortune 500 medical company customer** | Inventory (USD in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------- | :------------ | :---------------- | | Raw materials and supplies | - | 172 | | Work in progress | - | 19 |\n| Finished goods | - | 12 |\n| Total | - | 203 | - For the six months ended June 30, 2025, the Company recognized an **inventory impairment** of **$203 thousand** related to the **Fortune 500 medical company customer**[84](index=84&type=chunk) [Note 8 – Loss Per Share](index=25&type=section&id=Note%208%20%E2%80%93%20Loss%20Per%20Share) This note explains the calculation of **basic and diluted loss per share**, stating that all **outstanding stock options and warrants** were excluded from the **diluted loss per share** calculation due to their **anti-dilutive effect** - **Basic loss per share** is computed by dividing **net loss attributable to ordinary shareholders** by the **weighted average number of ordinary shares**[85](index=85&type=chunk) - All **outstanding stock options and warrants** were excluded from the calculation of **diluted loss per share** because they had an **anti-dilutive effect**[87](index=87&type=chunk) [Note 9 – Commitments and Contingencies](index=25&type=section&id=Note%209%20%E2%80%93%20Commitments%20and%20Contingencies) This note discloses the company's **commitment related to a grant** from the **Israel Innovation Authority (IIA)** for production line enhancement, requiring **3% royalties** up to the funded amount, contingent on successful enhancement and sales generation - The Company received approval from the **Israel Innovation Authority (IIA)** to support its **production line and capabilities**, requiring **3% royalties** up to the amount of **IIA funding received**[88](index=88&type=chunk) - **Repayment** of the **IIA grant** is **contingent upon** the Company successfully completing its enhancement plans and generating sales from the performed enhancements[88](index=88&type=chunk) [Note 10 – Segment Reporting](index=26&type=section&id=Note%2010%20%E2%80%93%20Segment%20Reporting) This note states that the company operates as a **single reportable segment**, specializing in **vision-based platform solutions**, and provides a summary of **significant expense categories** reviewed by the **chief operating decision maker** - The Company has one **reportable segment** specializing in **vision-based platform solutions**[91](index=91&type=chunk) | Expense Category (USD in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Revenues | 2,427 | 1,368 | 362 | 1,181 | | Cost of Sales (*) | 1,749 | 1,038 | 229 | 649 | | Research and Development expenses (*)| 4,340 | 2,722 | 2,112 | 1,303 | | Sales and marketing (*) | 820 | 364 | 527 | 180 | | General and Administrative expenses (*)| 2,807 | 1,945 | 1,056 | 919 | | Stock-based payments | 1,651 | 963 | 845 | 463 | | Net loss | (8,340) | (5,344) | (4,075) | (2,182) | [Note 11 – Subsequent Events](index=26&type=section&id=Note%2011%20%E2%80%93%20Subsequent%20Events) The company evaluated **subsequent events and transactions** up to the financial statements' issuance date and identified **no subsequent events** - **No subsequent events or transactions were identified** after the **balance sheet date** up to the date the **financial statements were issued**[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides **management's perspective** on the company's **financial performance and condition** for the periods ended June 30, 2025, and 2024, covering an **overview of the business**, the impact of the recent **public offering** and **Nasdaq listing**, the effects of the **ongoing war in Israel**, and a detailed comparison of **financial results**, **cash flows**, **backlog**, and **liquidity** [Overview](index=27&type=section&id=Overview) **Odysight.ai** is a pioneer in **AI-driven visualization solutions** for **Predictive Maintenance (PdM)** and **Condition Based Monitoring (CBM)**, deploying small cameras in harsh environments, with the **Odysight TruVision solution** providing real-time visual analysis, anomaly detection, and predictive insights, serving customers like NASA and the Israeli Air Force, and the company's **backlog** as of June 30, 2025, is approximately **$14.4 million**, primarily from defense and aviation contracts, following the **derecognition of a medical company contract** - **Odysight.ai** develops, produces, and markets innovative visualization and AI solutions for **Predictive Maintenance (PdM)** and **Condition Based Monitoring (CBM)**, using small cameras to monitor critical safety components in hard-to-reach locations[97](index=97&type=chunk) - The **Odysight TruVision solution** streams visual information to an in-platform AI/machine learning computer, providing **real-time failure/anomaly detection**, events and data recordings, and **real-time alerts**, while training algorithms for improved accuracy[98](index=98&type=chunk) - The company's **backlog** as of June 30, 2025, was approximately **$14.4 million**, reflecting mostly contracts with major government clients and defense and aviation companies, after **derecognizing a contract** with a **Fortune 500 medical company**[101](index=101&type=chunk)[102](index=102&type=chunk) [Public Offering and Nasdaq Listing](index=28&type=section&id=Public%20Offering%20and%20Nasdaq%20Listing) In February 2025, the company completed a **public offering**, including an over-allotment option, selling **3,653,124 shares** at **$6.50 per share**, generating approximately **$20.9 million** in **net proceeds**, and concurrently, its **common stock** began trading on the **Nasdaq Capital Market** under the symbol '**ODYS**' - In February 2025, the company sold **3,653,124 shares of common stock** at **$6.50 per share** through a **public offering**, generating approximately **$23.7 million** in **gross proceeds** and **$20.9 million** in **net proceeds**[103](index=103&type=chunk) - The company's **common stock** began trading on the **Nasdaq Capital Market** under the symbol '**ODYS**' in February 2025[103](index=103&type=chunk) [Impact of the Ongoing War in Israel on Our Business](index=28&type=section&id=Impact%20of%20the%20Ongoing%20War%20in%20Israel%20on%20Our%20Business) The **ongoing war in Israel**, including recent conflicts with Iran, has caused **minor disruptions** to the company's operations, such as temporary office closures and executive military reserve duty, and while some client transactions have been delayed, the war has also led to **increased interest** in the company's technology from Israeli government agencies and defense clients, potentially accelerating technology assimilation - The **war in Israel**, including a 12-day conflict with Iran in June 2025, has caused **minor disruptions** to the company's routine work, such as temporary office closures and some employees, including the CEO, being called to military reserve duty[104](index=104&type=chunk)[105](index=105&type=chunk) - The war has not had a **material adverse effect** on the company's business to date, despite some **delays in clients finalizing purchase orders**[105](index=105&type=chunk) - Conversely, the company has experienced **growing interest** in its technology from Israeli clients, including government agencies and R&D programs, due to the intensive flight hours of Israeli Air Force platforms and an enhanced Ministry of Defense budget[106](index=106&type=chunk) [Comparison of the six months ended June 30, 2025 and 2024](index=28&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030,%202025%20and%202024) For the six months ended June 30, 2025, **revenues increased by 77%** to **$2,427 thousand**, primarily due to the **derecognition of a contract liability** and **increased vision-based platform solutions**, however, **operating expenses** (R&D, S&M, G&A) also **significantly increased**, leading to a **57% rise** in **operating loss** to **$(8,998) thousand** | Metric (USD in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | % Change | | :------------------------ | :----------------------------- | :----------------------------- | :------- | | Revenues | 2,427 | 1,368 | 77% | | Cost of Revenues | 1,756 | 1,077 | 63% | | Gross Profit | 671 | 291 | 131% | | Research and development expenses | 4,843 | 2,975 | 63% | | Sales and marketing expense | 1,024 | 459 | 123% | | General and administrative expenses | 3,802 | 2,585 | 47% | | Operating Loss | (8,998) | (5,728) | 57% | - The **increase in revenue** was **primarily due to the full derecognition of a $1,690 thousand contract liability** associated with a **Fortune 500 medical company customer** and an **increase in revenues** from **vision-based platform solutions** for **PdM** and **CBM**[109](index=109&type=chunk) - **Research and development expenses increased by 63%** due to new product development, recruitment of new employees, **increased stock-based compensation**, and procurement for Industry 4.0 projects[114](index=114&type=chunk)[115](index=115&type=chunk) - **Sales and marketing expenses surged by 123%** due to efforts to penetrate new markets, recruitment, **increased stock-based compensation**, and engagement of new marketing consultants[117](index=117&type=chunk)[118](index=118&type=chunk) - **General and administrative expenses rose by 47%** due to increased payroll, expenses related to fundraising and Nasdaq uplisting, and **higher stock-based compensation**[120](index=120&type=chunk)[126](index=126&type=chunk) [Comparison of the three months ended June 30, 2025 and 2024](index=32&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030,%202025%20and%202024) For the three months ended June 30, 2025, **revenues decreased by 69%** to **$362 thousand**, mainly due to reduced sales to a **Fortune 500 medical company customer**, and despite lower **cost of revenues**, **gross profit declined by 74%**, with **operating expenses** (R&D, S&M, G&A) **increased significantly**, resulting in an **88% rise** in **operating loss** to **$(4,438) thousand** | Metric (USD in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | % Change | | :------------------------ | :------------------------------- | :------------------------------- | :------- | | Revenues | 362 | 1,181 | (69)% | | Cost of Revenues | 229 | 667 | (66)% |\n| Gross Profit | 133 | 514 | (74)% |\n| Research and development expenses | 2,356 | 1,408 | 67% |\n| Sales and marketing expense | 628 | 225 | 179% |\n| General and administrative expenses | 1,587 | 1,245 | 27% |\n| Operating Loss | (4,438) | (2,364) | 88% | - **Revenues decreased by 69% primarily due to a decrease in revenues** from the **Fortune 500 medical company customer**, partially offset by an **increase in revenues** from **vision-based platform solutions** for **PdM** and **CBM**[133](index=133&type=chunk) - **Research and development expenses increased by 67%** due to new product development, recruitment of new employees, **increased stock-based compensation**, and procurement for Industry 4.0 projects[139](index=139&type=chunk)[140](index=140&type=chunk) - **Sales and marketing expenses increased by 179%** due to efforts to penetrate new markets, recruitment of new employees, **increased stock-based compensation**, and engagement of new marketing consultants[142](index=142&type=chunk)[143](index=143&type=chunk) [Cash Flows](index=30&type=section&id=Cash%20Flows) **Cash used in operating activities increased** for both the six-month and three-month periods ended June 30, 2025, driven by **net losses** and changes in operating assets/liabilities, with **investing activities** providing cash in 2025 (six months) but using cash in 2025 (three months), and **financing activities** providing a **significant $21.1 million** in cash for the six months ended June 30, 2025, primarily from share issuance | Cash Flow Category (USD in thousands) | Six month ended June 30, 2025 | Six month ended June 30, 2024 | | :------------------------------------ | :---------------------------- | :---------------------------- | | Cash used in Operating Activity | (6,403) | (3,323) | | Cash provided by Investing Activity | 280 | 7,970 | | Cash provided by Financing Activity | 21,056 | - | | Cash Flow Category (USD in thousands) | Three month ended June 30, 2025 | Three month ended June 30, 2024 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Cash used in Operating Activity | (4,170) | (2,093) | | Cash provided by (used in) Investing Activity | (3) | 7,992 | | Cash provided by Financing Activity | 34 | - | - **Cash used in operating activities** for the six months ended June 30, 2025, was **$6.4 million**, consisting of a **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**[125](index=125&type=chunk) - **Cash provided by financing activities** for the six months ended June 30, 2025, was **$21.1 million**, **primarily from proceeds from the issuance of shares**, net of issuance costs, and **options exercise**[130](index=130&type=chunk) [Backlog](index=34&type=section&id=Backlog) The company's **backlog**, representing contracted revenue not yet recognized, was approximately **$14.4 million** as of June 30, 2025, a slight decrease from **$15.0 million** at December 31, 2024, and is subject to customer cancellations or rescheduling - **Backlog** as of June 30, 2025, was approximately **$14.4 million**, compared to approximately **$15.0 million** as of December 31, 2024[154](index=154&type=chunk) - **Backlog** represents **booked orders** based on **purchase orders** or **hard commitments** but not yet recognized as revenue, and orders may be cancelled or rescheduled by customers[153](index=153&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had **$33.2 million** in **cash and cash equivalents**, an increase from **$18.5 million** at December 31, 2024, largely due to proceeds from a February 2025 **public offering**, and despite an **accumulated deficit** of **$54.3 million**, management believes existing cash will fund operations for at least the next 12 months, but anticipates needing **additional capital** for long-term growth and commercialization | Metric (USD in millions) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Cash and cash equivalents and restricted cash | 33.2 | 18.5 | | Accumulated deficit | 54.3 | 46.0 | - The company's **primary sources of liquidity** have been fundraising, customer revenues, and **warrant exercises**[157](index=157&type=chunk) - Management believes existing **cash and cash equivalents** will fund **operating plans** for at least the next 12 months, but expects to incur **significant R&D and commercialization expenses**, requiring **additional capital** for future growth[158](index=158&type=chunk) [Contractual Obligations and Commitments](index=36&type=section&id=Contractual%20Obligations%20and%20Commitments) The company's **contractual obligations** primarily consist of **operating lease payments** for offices and vehicles, totaling approximately **$1 million** as of June 30, 2025, and the company does not have any **off-balance sheet arrangements** - Total future payments for **operating lease obligations** as of June 30, 2025, were approximately **$1 million**[160](index=160&type=chunk) - The company does not currently have any **off-balance sheet arrangements**[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a **smaller reporting company**, **Odysight.ai Inc.** is not required to provide detailed quantitative and qualitative disclosures about **market risk** in this report - As a **smaller reporting company**, **Odysight.ai Inc.** is not required to provide quantitative and qualitative disclosures about **market risk**[162](index=162&type=chunk) [Item 4. Control and Procedures](index=36&type=section&id=Item%204.%20Control%20and%20Procedures) Management, including the principal executive and financial officers, concluded that the company's **disclosure controls and procedures** were effective as of June 30, 2025, and **no material changes in internal control over financial reporting** occurred during the quarter - Management concluded that the company's **disclosure controls and procedures** were effective as of June 30, 2025[163](index=163&type=chunk) - **No material changes in internal control over financial reporting** occurred during the fiscal quarter ended June 30, 2025[164](index=164&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20proceedings) The company's management believes there are **no current legal claims or actions pending** against it that would have a **material adverse effect** on its results of operations, financial condition, or cash flows - Management believes there are **no current legal claims or actions pending** against the company that could have a **material adverse effect** on its results of operations, financial condition, or cash flows[166](index=166&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section introduces a new risk factor concerning the potential negative impact of **U.S. trade tariffs** implemented in 2025 on the company's import costs, supply chain, profit margins, and competitive position, in addition to previously disclosed risks - A **new risk factor** highlights that **U.S. trade tariffs** implemented in 2025 may **increase costs** of importing products and **supply chain costs**, potentially **reducing profit margins** and affecting the company's **competitive position**[168](index=168&type=chunk) - The tariffs could lead to **higher purchase prices for U.S. customers**, driving them to seek local alternatives and **decreasing demand** for the company's products[168](index=168&type=chunk) - **Uncertainty and volatility** from these tariffs **complicate decision-making, planning, and forecasting**, making it difficult to predict future costs and financial outcomes accurately[168](index=168&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported **no sales of unregistered equity securities** during the three months ended June 30, 2025 - During the three months ended June 30, 2025, the company did not have any **sales of unregistered securities**[169](index=169&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported **no defaults upon senior securities** during the period - The company reported **no defaults upon senior securities**[170](index=170&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - **Mine Safety Disclosures** are not applicable to the company[171](index=171&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20information) This section details a revised **Director Appointment and Service Agreement** with Jackson Schneider, effective August 13, 2025, which **increases his annual fee** to **$120,000**, proposes a grant of **50,000 stock options**, and establishes a **commission structure** for initiating new commercial agreements with pre-approved third parties - A revised **Director Appointment and Service Agreement** with Jackson Schneider, effective August 13, 2025, **increases his annual fee** from **$80,000** to **$120,000**[172](index=172&type=chunk) - The revised agreement recommends granting Mr. Schneider options to purchase **50,000 shares of common stock**, vesting over three years[172](index=172&type=chunk) - Mr. Schneider will receive a one-time **commission** (**2%** up to **$250M**, **1.5%** between **$250M**-**$400M**, **1%** over **$400M**) on **net revenue** from new commercial agreements with pre-approved third parties that he initiates or facilitates[172](index=172&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists all documents filed as exhibits to the **Quarterly Report on Form 10-Q**, including corporate governance documents, certifications, and Inline XBRL data files - The exhibits include **Amended and Restated Articles of Incorporation and Bylaws**, **Director Appointment and Service Agreement**, **Certifications of Principal Executive and Financial Officers**, and various **Inline XBRL documents**[176](index=176&type=chunk) SIGNATURES [Report Signatures](index=40&type=section&id=Report%20Signatures) The **Quarterly Report on Form 10-Q** is duly signed on behalf of **Odysight.ai Inc.** by its **Chief Executive Officer**, Yehu Ofer, and **Chief Financial Officer**, Einav Brenner, as of August 13, 2025 - The report is signed by Yehu Ofer, **Chief Executive Officer**, and Einav Brenner, **Chief Financial Officer**, of **Odysight.ai Inc.**[179](index=179&type=chunk) - The signing date for the report is August 13, 2025[179](index=179&type=chunk)

Core Viewpoint - Odysight.ai Inc. has successfully delivered a vision-based monitoring system for the Heron TP UAV, enhancing remote monitoring capabilities for Israel's Ministry of Defense [1][3] Group 1: Product Development and Features - The vision-based monitoring system utilizes unique algorithms and a miniature sensor-based optical system to provide advanced remote monitoring [1] - The integration supports improved engine health monitoring and mission assurance specifically for the PT6A-67 engine by Pratt & Whitney, aimed at enhancing airworthiness and operational safety in the Israeli Air Force [2] - The system allows for remote visual monitoring of hard-to-access engine areas, even during flight, showcasing significant technological advancements [3] Group 2: Strategic Collaborations - The initiative was developed in collaboration with the Directorate of Defense Research and Development (MAFAT), which integrates civilian startup capabilities into advanced defense applications [3] Group 3: Company Overview - Odysight.ai is focused on Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) markets, providing video sensor-based solutions across aviation, transportation, and energy sectors [4] - The company leverages visual technologies and products from the medical industry to enhance its offerings in PdM and CBM use cases [4]

Core Viewpoint - Odysight.AI Inc. has entered a commercial collaboration agreement with a multinational technology group to deploy proof-of-concepts for predictive maintenance technology in heavy vehicles across various sectors, marking a significant expansion beyond aviation [1][4]. Group 1: Collaboration Details - The initial deployment will focus on heavy vehicles in defense, mining, agriculture, and heavy autonomous vehicle sectors [1]. - The collaboration follows successful trials of Odysight.AI's system on a critical aviation component, validating its performance under extreme conditions [2]. - Both parties are exploring expanded deployments in aviation and other sectors, aiming for broader collaborative opportunities [3]. Group 2: Technology and Benefits - The integration of Odysight.AI's solution is expected to enhance platform safety, reduce maintenance demands, lower costs, and improve operational efficiency [3]. - Odysight.AI specializes in Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) markets, utilizing video sensor-based solutions for critical systems in aviation, transportation, and energy [5]. - The company's technology allows visibility into hard-to-reach locations and harsh environments, providing real-time monitoring capabilities [5]. Group 3: Strategic Importance - The partnership reflects a shared commitment to driving smarter, safer, and more sustainable operations across various industries [4]. - The global partner is recognized for innovation and quality in engineered materials and smart solutions, aligning with Odysight.AI's focus on safety and operational efficiency [4].

Company Overview - Odysight.AI Inc. is a developer of AI systems for Predictive Maintenance (PdM) and Condition-Based Monitoring (CBM) [1][4] - The company provides video sensor-based solutions for critical systems in aviation, transportation, and energy industries [4] - Odysight.AI leverages visual technologies and products from the medical industry to enhance its offerings [4] Market Position - Odysight.AI was added to the Russell Microcap Index effective June 30, 2025, which enhances its visibility with institutional investors [1][3] - Membership in the Russell Microcap Index is based on market capitalization rankings and remains for one year [2] - Russell indexes serve as benchmarks for approximately $10.6 trillion in assets as of June 2024 [3] Strategic Insights - The CFO of Odysight.AI, Einav Brenner, emphasized that inclusion in the Russell Microcap Index reflects the company's momentum since its Nasdaq listing in February [3] - The recognition is expected to underscore confidence in the company's long-term growth strategy [3] - The company aims to deliver innovation, value, and sustained performance for its stakeholders as it scales [3] Industry Context - FTSE Russell, the global index provider, calculates thousands of indexes that benchmark markets and asset classes globally [6] - Approximately $18.1 trillion is benchmarked to FTSE Russell indexes, indicating the significance of these indexes in the investment landscape [6]

Core Insights - Odysight.AI Inc. has received an initial order for its Predictive Health Monitoring system aimed at monitoring belts and cables in cranes and elevators across key industrial sectors [1][4] - The AI-driven solution is expected to enhance infrastructure maintenance by improving performance, reliability, and safety while significantly reducing maintenance costs [2][5] - The system utilizes high-resolution cameras and machine learning algorithms for real-time monitoring, enabling early detection of faults and prediction of failures [3][6] Company Overview - Odysight.AI is a pioneer in the Predictive Maintenance and Condition-Based Monitoring markets, leveraging video sensor-based solutions for critical systems in aviation, transportation, and energy industries [7] - The company’s platform allows visibility into hard-to-reach locations and harsh environments, enhancing maintenance and operational capabilities [7] Strategic Collaboration - The partnership with a European industry leader marks a significant step for Odysight.AI, reflecting trust in its ability to deliver advanced solutions [4][6] - The collaboration aims to support smarter, safer, and more efficient infrastructure through real-time intelligence and operational resilience [4][6] Anticipated Benefits - Predictive maintenance and fault prevention through real-time monitoring and AI analytics are expected to extend asset lifespan and prevent critical failures [5][6] - Enhanced safety is anticipated due to continuous oversight of mechanical components, reducing risks for operators and end-users [5][6] - Operational efficiency improvements are expected from predictive insights that support streamlined scheduling and fewer unplanned outages [6]

Company Overview - Odysight.ai Inc. is a leading provider of visual-based predictive maintenance (PdM) and condition-based monitoring (CBM) solutions [1][4] - The company utilizes video sensor-based solutions for critical systems in aviation, transportation, and energy industries, leveraging technologies from the medical field [4] Conference Participation - Odysight.ai will participate in the 15th Annual ROTH London Conference on June 25–26, 2025, in London, U.K. [1] - Einav Brenner, the Chief Financial Officer, will be available for one-on-one investor meetings during the conference [1] ROTH London Conference Insights - The ROTH London Conference serves as a platform for institutional investors to connect with executive leadership from around 70 growth-oriented companies across various sectors [2] - The event is designed to facilitate insightful dialogue through one-on-one and small group meetings, allowing investors to gain deeper insights into business strategies and sector trends [2] ROTH Investment Bank Overview - ROTH is a relationship-driven investment bank that supports growth companies and their investors, offering services such as capital raising, equity research, macroeconomic insights, and M&A advisory [3] - The bank aims to provide innovative and actionable content while supporting clients throughout their growth journey [3]

[Executive Summary & Business Update](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Update) Odysight.ai reported strong Q1 2025 financial performance, strategic advancements, and successful Nasdaq uplisting, positioning for future growth [Key Highlights](index=1&type=section&id=Key%20highlights) Odysight.ai reported a strong net cash position and significant revenue growth in Q1 2025, driven by a major contract fulfillment, achieving a Nasdaq uplisting and securing new commercial partnerships - Net cash position of approximately **$37.2 million** as of March 31, 2025[2](index=2&type=chunk) Q1 2025 Revenues | Metric | Q1 2025 (USD) | Q1 2024 (USD) | | :----- | :------------ | :------------ | | Revenues | $2.1 million | $0.2 million | - Backlog was approximately **$14.8 million** as of March 31, 2025[4](index=4&type=chunk) [CFO Commentary](index=1&type=section&id=CFO%20Commentary) The CFO emphasized building technological and operational foundations for long-term growth, strengthening infrastructure, expanding capabilities, and establishing global partnerships, with the Nasdaq uplisting and recent capital raise enhancing the balance sheet, visibility, and access to customers and investors - Focus on strengthening infrastructure, expanding technological capabilities, establishing relationships with global leaders, and positioning for future success in Aerospace and new verticals[3](index=3&type=chunk) - Successful uplisting to Nasdaq and recent capital raise mark major milestones, strengthening the balance sheet and enhancing visibility, credibility, and access to global customers and investors[3](index=3&type=chunk) [Commercial Achievements](index=1&type=section&id=Commercial%20achievements) Odysight.ai secured key partnerships and initial purchase orders, expanding its reach in railway safety and industrial monitoring solutions - Partnered with Israel Railways to develop an advanced AI-powered visualization system to prevent derailments and enhance railway safety[6](index=6&type=chunk) - Received an initial purchase order from a European partner for a combined industrial solution using Odysight.ai's sensors and machine learning algorithms to monitor belts and cables across various industrial sectors[6](index=6&type=chunk) [Nasdaq Uplisting and Capital Raise](index=1&type=section&id=Nasdaq%20Uplisting%20and%20Capital%20Raise) The company successfully uplisted to the Nasdaq Capital Market in February 2025, raising significant gross proceeds to strengthen its financial position - Uplisted to the Nasdaq Capital Market in February 2025[6](index=6&type=chunk)[10](index=10&type=chunk) - Raised gross proceeds of **$23.7 million** through a U.S. underwritten public offering[6](index=6&type=chunk)[10](index=10&type=chunk) [Financial Performance - Q1 2025 Overview](index=1&type=section&id=Financial%20Performance%20-%20Q1%202025%20Overview) This section details Odysight.ai's Q1 2025 financial results, including significant revenue growth, increased operating expenses, and an improved cash position [Revenues](index=1&type=section&id=Revenues) Revenues significantly increased in Q1 2025, primarily due to the full recognition of a contract with a Fortune 500 medical company Q1 2025 Revenues Comparison | Metric | Q1 2025 (USD) | Q1 2024 (USD) | Change | | :----- | :------------ | :------------ | :----- | | Revenues | $2.1 million | $0.2 million | +$1.9 million | - The increase was primarily attributed to the full recognition of approximately **$1.7 million** in revenues from the fulfillment of a contract with a Fortune 500 medical company[4](index=4&type=chunk) [Cost of Revenues and Gross Profit](index=2&type=section&id=Cost%20of%20Revenues%20and%20Gross%20Profit) Cost of revenues increased due to contract fulfillment and inventory impairment, but gross profit improved significantly, turning from a loss to a positive margin, driven by Industry 4.0 revenues and the medical contract Q1 2025 Cost of Revenues and Gross Profit | Metric | Q1 2025 (USD) | Q1 2024 (USD) | Change | | :---------------- | :------------ | :------------ | :----- | | Cost of Revenues | $1.5 million | $0.4 million | +$1.1 million | | Gross Profit (Loss) | $0.6 million | ($0.2 million) | +$0.8 million | | Gross Margin | 26% | N/A | Improvement | - Increase in Cost of Revenues primarily attributed to approximately **$1 million** related to the Fortune 500 medical company contract fulfillment and **$0.2 million** inventory impairment[7](index=7&type=chunk) - Gross profit improvement attributable to Industry 4.0 revenues and the contract fulfillment related to a Fortune 500 medical company[8](index=8&type=chunk) [Operating Expenses](index=2&type=section&id=Operating%20Expenses) Operating expenses increased significantly due to the expansion of operations, development of new products, and one-time costs associated with the Nasdaq uplisting Q1 2025 Operating Expenses | Metric | Q1 2025 (USD) | Q1 2024 (USD) | Change | | :--------------- | :------------ | :------------ | :----- | | Operating Expenses | $5.1 million | $3.1 million | +$2.0 million | - Increase primarily driven by the expansion of the Company's operations, including the development of new Industry 4.0 products and one-time expenses related to the Nasdaq uplisting[9](index=9&type=chunk) [Net Loss](index=2&type=section&id=Net%20Loss) The company reported an increased net loss in Q1 2025 compared to the prior year, despite revenue growth, primarily due to higher operating expenses Q1 2025 Net Loss | Metric | Q1 2025 (USD) | Q1 2024 (USD) | Change | | :------- | :------------ | :------------ | :----- | | Net Loss | ($4.3 million) | ($3.2 million) | -($1.1 million) | [Cash Position](index=1&type=section&id=Cash%20Position) Odysight.ai significantly improved its cash balance as of March 31, 2025, largely due to the proceeds from its Nasdaq public offering Cash Balance Comparison | Metric | March 31, 2025 (USD) | March 31, 2024 (USD) | Change | | :---------- | :------------------- | :------------------- | :----- | | Cash Balance | $37.2 million | $17.0 million | +$20.2 million | - The increase in cash balance is primarily due to the approximately **$23.7 million** gross proceeds from the Nasdaq public offering completed in February 2025[10](index=10&type=chunk) [Backlog](index=1&type=section&id=Backlog) The company reported a substantial backlog as of March 31, 2025, representing booked orders not yet recognized as revenue Backlog as of March 31, 2025 | Metric | As of March 31, 2025 (USD) | | :------- | :------------------------- | | Backlog | $14.8 million | - Backlog refers to booked orders based on purchase orders or hard commitments not yet recognized as revenue, and is not a comprehensive indicator of future revenue or profitability[5](index=5&type=chunk) [About Odysight.ai](index=2&type=section&id=About%20Odysight.ai) Odysight.ai is a pioneer in Predictive Maintenance and Condition Based Monitoring, offering AI-powered video sensor solutions for critical industrial systems [Company Profile](index=2&type=section&id=Company%20Profile) Odysight.ai is a pioneer in Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) markets, offering visualization and AI platforms with video sensor-based solutions for critical systems across aviation, transportation, and energy industries - Odysight.ai pioneers the Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) markets with its visualization and AI platform[11](index=11&type=chunk) - Provides video sensor-based solutions for critical systems in the aviation, transportation, and energy industries, leveraging proven visual technologies from the medical industry[11](index=11&type=chunk) - Utilizes unique video-based sensors, embedded software, and AI algorithms deployed in hard-to-reach locations and harsh environments for various PdM and CBM use cases[11](index=11&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents Odysight.ai's interim condensed consolidated statements of operations and balance sheets for Q1 2025 [Interim Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) The interim condensed consolidated statements of operations provide a detailed breakdown of the company's revenues, costs, and expenses, resulting in the net loss for the three months ended March 31, 2025, compared to the same period in 2024 Interim Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric (USD in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :------------------------ | :-------------------------------- | :-------------------------------- | | REVENUES | 2,065 | 187 | | COST OF REVENUES | 1,527 | 410 | | GROSS PROFIT (LOSS) | 538 | (223) | | RESEARCH AND DEVELOPMENT EXPENSES | 2,487 | 1,567 | | SALES AND MARKETING EXPENSES | 396 | 234 | | GENERAL AND ADMINISTRATIVE EXPENSES | 2,215 | 1,340 | | OPERATING LOSS | (4,560) | (3,364) | | FINANCING INCOME, NET | 295 | 202 | | NET LOSS | (4,265) | (3,162) | [Interim Condensed Consolidated Balance Sheets](index=5&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The interim condensed consolidated balance sheets present the company's financial position as of March 31, 2025, and December 31, 2024, detailing assets, liabilities, and shareholders' equity Interim Condensed Consolidated Balance Sheets | Metric (USD in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------ | :------------- | :---------------- | | **Assets** | | | | Cash and cash equivalents | 36,881 | 18,164 | | Total current assets | 38,091 | 20,787 | | Total non-current assets | 1,752 | 2,892 | | **TOTAL ASSETS** | **39,843** | **23,679** | | **Liabilities** | | | | Total current liabilities | 3,418 | 3,295 | | Total non-current liabilities | 660 | 2,140 | | **TOTAL LIABILITIES** | **4,078** | **5,435** | | **Shareholders' Equity** | | | | Additional paid-in capital | 85,987 | 64,205 | | Accumulated deficit | (50,239) | (45,974) | | **TOTAL SHAREHOLDERS' EQUITY** | **35,765** | **18,244** | | **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | **39,843** | **23,679** | [Additional Information](index=2&type=section&id=Additional%20Information) This section provides important disclaimers regarding backlog, forward-looking statements, and company contact information [Backlog Definition and Disclaimer](index=2&type=section&id=Backlog%20Definition%20and%20Disclaimer) This section clarifies the company's definition of "backlog" as booked orders not yet recognized as revenue, emphasizing that it is a supplemental informational measure and not a comprehensive indicator of future financial performance or profitability - Backlog is defined as booked orders based on purchase orders or hard commitments but not yet recognized as revenue[5](index=5&type=chunk)[13](index=13&type=chunk) - It is presented for supplemental informational purposes only and is not a comprehensive indicator of future revenue or profitability, nor a substitute for GAAP financial measures[5](index=5&type=chunk)[13](index=13&type=chunk) - Orders included in backlog may be cancelled, reduced, or delayed by customers due to various conditions[5](index=5&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements regarding future events and performance, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations - Statements in the news release regarding future events or performance are forward-looking, subject to risks and uncertainties that could cause actual performance or results to differ materially[14](index=14&type=chunk) - Key risk factors include market acceptance, product delays, regulatory approvals, intense competition, product liability, manufacturing limitations, inability to establish sales/marketing, attracting personnel, intellectual property, reliance on single customers/suppliers, need for additional capital, cyberattacks, foreign jurisdiction risks, and political/economic instability in Israel[14](index=14&type=chunk) [Company and Investor Contacts](index=3&type=section&id=Company%20Contact) Contact information for the company's CFO and investor relations is provided for inquiries - Company Contact: Einav Brenner, CFO, info@odysight.ai[15](index=15&type=chunk) - Investor Relations Contact: Miri Segal, MS-IR LLC, msegal@ms-ir.com, Tel: +1-917-607-8654[15](index=15&type=chunk)