ODYS

Odysight.ai Inc. (ODYS) - Q2 2026 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended June 30, 2026. Odysight.ai Inc. is a developer of vision-based AI solutions for Predictive Maintenance (PdM) and Condition Based Monitoring (CBM), serving civil and defense sectors. The company is incorporated in Nevada with principal operations in Israel. As of August 12, 2026, there were 16,806,905 shares of common stock outstanding. The company is listed on the Nasdaq Capital Market and the Tel Aviv Stock Exchange (TASE).

Key Financial Metrics

Note: All figures are in thousands of USD unless otherwise noted. The company reported a gross margin of approximately 38% for the six months ended June 30, 2026.

Material Changes vs. Prior Period

• Revenue Decline (YTD): Revenues decreased 79% year-over-year to $502,000. This is primarily due to the absence of revenue from a Fortune 500 medical company arrangement, which was derecognized in Q1 2025 ($1.69 million contract liability reversal).
• Revenue Growth (QoQ): Q2 2026 revenue increased 16% compared to Q2 2025 ($420k vs $362k), driven by the completion of ongoing projects and commencement of new ones.
• Expense Increases: Sales and marketing expenses rose 84% YTD to $1.88 million due to global expansion efforts and new hiring. Research and Development (R&D) expenses remained relatively flat YTD ($4.80 million vs $4.84 million) despite team restructuring.
• Liquidity Reduction: Cash and cash equivalents decreased from $26.0 million at year-end 2025 to $17.2 million at June 30, 2026, reflecting a net cash burn of approximately $8.9 million over the six-month period.

Outlook, Risks, and Management Commentary

• Geopolitical Impact: The ongoing conflict in the Middle East (specifically hostilities involving Israel, Iran, and Hezbollah) has caused delays in customer orders and deliveries. While the company has adopted work-from-home measures and overtime, there is uncertainty regarding the duration of the conflict and its impact on the Israeli economy and operations.
• Liquidity Position: Management believes current cash resources will fund operations for at least the next 12 months. However, the company expects to continue incurring significant losses and will require additional financing to achieve profitability.
• Capital Markets: On June 5, 2026, the company entered into a Sales Agreement with Roth Capital Partners to sell up to $20 million of common stock in "at-the-market" offerings. No shares have been sold under this agreement as of the filing date.
• Backlog: Remaining Performance Obligations (RPO) increased slightly to approximately $14.1 million as of June 30, 2026, compared to $13.8 million at year-end 2025.
• Risks: Key risks include dependence on a limited number of customers, the volatility of the security situation in Israel, potential boycotts of Israeli goods, and the need for future capital raises which may result in dilution.

Investor Verification Checklist

• Cash Runway: Verify the sufficiency of the $17.2 million cash balance against the current burn rate of ~$4.5 million per quarter to confirm the 12-month liquidity assertion.
• Backlog Realization: Assess the convertibility of the $14.1 million backlog into revenue, considering the stated risks of order cancellations or delays due to geopolitical instability.
• Revenue Concentration: Review the specific customer mix to understand the impact of the loss of the Fortune 500 medical client and the reliance on defense/government contracts.
• Financing Needs: Monitor the utilization of the new $20 million ATM facility and any potential need for additional equity or debt financing before the 12-month horizon.
• Geopolitical Exposure: Evaluate the specific operational disruptions caused by the conflict in Israel, including employee reserve duty and office closures, and their effect on project timelines.