Odysight.ai Inc(ODYS) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements Forward-Looking Statements Disclosure 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] - 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] - 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] PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (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 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] - Total Shareholders' Equity increased by $14,360 thousand (78.7%) from December 31, 2024, to June 30, 2025[20] Consolidated Statements of Operations and Comprehensive Loss 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] - 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] Interim Condensed Consolidated Statements of Changes in Shareholders' Equity 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] - 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] Interim Condensed Consolidated Statements of Cash Flows 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] - 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] Notes to the Interim Condensed Consolidated Financial Statements 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 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] - In February 2025, the company closed a public offering, generating approximately $20.9 million in net proceeds after deducting issuance costs[40] - 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] Note 2 – Basis of Presentation and Significant Accounting Policies 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] - As of June 30, 2025, the Company accumulated a deficit of approximately $54.3 million[50] - 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] Note 3 – Leases 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][55] - 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][56] | 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 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 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 $20.9 million[62] | Warrant | Issuance Date | Expiration Date | Exercise Price Per Share ($) | 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 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] - Remaining Performance Obligations (RPO) amounted to approximately $14.4 million as of June 30, 2025[81] Note 7 – Inventory 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] Note 8 – Loss Per Share 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] - All outstanding stock options and warrants were excluded from the calculation of diluted loss per share because they had an anti-dilutive effect[87] Note 9 – Commitments and Contingencies 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] - Repayment of the IIA grant is contingent upon the Company successfully completing its enhancement plans and generating sales from the performed enhancements[88] Note 10 – Segment Reporting 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] | 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 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] - 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][102] Public Offering and Nasdaq Listing 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] - The company's common stock began trading on the Nasdaq Capital Market under the symbol 'ODYS' in February 2025[103] Impact of the Ongoing War in Israel on Our Business 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][105] - 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] - 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] Comparison of the six months ended June 30, 2025 and 2024 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] - 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][115] - 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][118] - General and administrative expenses rose by 47% due to increased payroll, expenses related to fundraising and Nasdaq uplisting, and higher stock-based compensation[120][126] Comparison of the three months ended June 30, 2025 and 2024 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] - 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][140] - 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][143] Cash Flows 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] - 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] 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] - 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] Liquidity and Capital Resources 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] - 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] Contractual Obligations and Commitments 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] - The company does not currently have any off-balance sheet arrangements[161] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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] Item 4. Control and Procedures 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] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[164] PART II - OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] - 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] - Uncertainty and volatility from these tariffs complicate decision-making, planning, and forecasting, making it difficult to predict future costs and financial outcomes accurately[168] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - The company reported no defaults upon senior securities[170] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[171] Item 5. Other Information 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] - The revised agreement recommends granting Mr. Schneider options to purchase 50,000 shares of common stock, vesting over three years[172] - 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] Item 6. Exhibits 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] SIGNATURES Report Signatures 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] - The signing date for the report is August 13, 2025[179]