Odysight.ai Inc. (ODYS) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended March 31, 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 a smaller reporting company listed on the Nasdaq Capital Market and, as of April 9, 2026, the Tel Aviv Stock Exchange (TASE). The company operates primarily from Israel and has an accumulated deficit of approximately $68.2 million.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $82,000 | $2,065,000 |
| Gross Profit | $21,000 | $538,000 |
| Gross Margin | 25.6% | 26.1% |
| Operating Loss | $(5,338,000) | $(4,560,000) |
| Net Loss | $(5,181,000) | $(4,265,000) |
| Cash and Equivalents | $21,763,000 | $36,881,000 (Q1 2025) |
| Operating Cash Flow | $(4,254,000) | $(2,233,000) |
| Backlog (RPO) | $14.0 million | $13.8 million (Dec 31, 2025) |
Material Changes vs. Prior Period
- Revenue Decline: Revenue dropped 96% year-over-year. This is primarily due to the derecognition of a $1.69 million contract liability associated with a Fortune 500 medical customer in Q1 2025, which did not recur. Additionally, geopolitical tensions in the Middle East caused delays in customer orders and deliveries.
- Expense Increases: Sales and marketing expenses rose 143% to $962,000 due to global expansion efforts. Research and development expenses increased slightly by 3% to $2.56 million. General and administrative expenses decreased 17% to $1.84 million, largely due to reduced fundraising costs compared to the prior year.
- Liquidity: Cash and cash equivalents decreased by approximately $4.2 million during the quarter, driven by operating losses. The company maintains a cash runway of at least 12 months.
Outlook, Risks, and Management Commentary
- Geopolitical Impact: The ongoing conflict in Israel, including recent hostilities with Iran and Hezbollah, has caused office closures, employee reserve duty, and delays in project deliveries. Management notes that while the situation is dynamic, the impact on future operations remains uncertain.
- Defense Sector Interest: Despite delays, the company reports growing interest from Israeli government agencies and defense R&D programs due to increased flight hours and defense budgets.
- Capital Needs: The company expects to continue incurring significant R&D and commercialization costs. It anticipates a need for additional financing to fund operations until profitability is achieved.
- Stock Activity: Warrants issued in 2021 expired on March 31, 2026. Warrants from a 2023 private placement were exercised on a cashless basis in March 2026, resulting in the issuance of approximately 407,000 shares.
Investor Verification Checklist
- Revenue Sustainability: Verify the status of the $14 million backlog and the likelihood of conversion given the geopolitical delays.
- Cash Burn Rate: Monitor the monthly cash burn rate against the $21.8 million cash balance to confirm the 12-month runway assertion.
- Geopolitical Exposure: Assess the specific impact of the Israel-Iran/Hezbollah conflict on the company's ability to fulfill defense contracts and operate in Israel.
- Customer Concentration: Review the dependency on a limited number of customers, particularly in the defense and medical sectors.
- Dilution Risk: Track potential future equity issuances required to fund operations, given the lack of profitability and significant operating losses.