季報
季度報告
10-Q
2026-05-14
Odysight.ai首季收入僅8.2萬美元 按年急跌96% 淨虧損518萬美元
AI 繁中摘要
📄 **申報類型：10-Q（2026財年第一季度，截至2026年3月31日）**
**公司：Odysight.ai Inc.（納斯達克：ODYS，特拉維夫證券交易所：ODYS）**
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**業績重點：**
Odysight.ai 第一季收入僅錄得 **8.2萬美元**，較去年同期的 **206.5萬美元** 大幅下跌96%，主因是去年同期有一筆 **169萬美元** 的合同負債解除確認（與一家 Fortune 500 醫療客戶相關）及中東地緣政治局勢導致部分訂單延遲。
毛利由 **53.8萬美元** 跌至 **2.1萬美元**，毛利率僅25.6%。
營運開支方面，研發費用 **255.7萬美元**，按年微增3%；銷售及市場推廣費用 **96.2萬美元**，按年大增143%，反映公司積極擴展全球銷售團隊。
一般及行政費用 **184萬美元**，按年減少17%，主要由於上年度有較大額的上市相關開支。
期內營運虧損 **533.8萬美元**，較去年同期的456萬美元擴大約17%。
淨虧損 **518.1萬美元**（每股虧損 **0.32美元**），去年同期為426.5萬美元（每股虧損0.29美元）。
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**資產負債及現金流：**
截至2026年3月31日，公司持有現金及現金等價物 **2,176.3萬美元**（較2025年底減少約391萬美元），總資產 **2,464.1萬美元**，股東權益 **2,116.3萬美元**，累計虧損已達 **6,819萬美元**。
經營活動現金流出 **425.4萬美元**（去年同期流出223.3萬美元），主要因淨虧損擴大。
投資活動現金流出僅 **6,000美元**（購置固定資產）。
融資活動現金流入 **3.2萬美元**，來自行使期權所得；去年同期因2月完成公開發行（3,653
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ODYS:RestrictedStockUnitMember 2026-01-01 2026-03-31 0001577445 ODYS:RestrictedStockUnitMember 2025-01-01 2025-12-31 0001577445 ODYS:WarrantsMember 2026-01-01 2026-03-31 0001577445 ODYS:WarrantsMember 2025-01-01 2025-12-31 0001577445 us-gaap:CorporateMember 2026-01-01 2026-03-31 0001577445 us-gaap:CorporateMember 2025-01-01 2025-03-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure iso4217:ILS ODYS:Segment UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2026 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-42497 ODYSIGHT.AI INC. (Exact name of registrant as specified in its charter) Nevada 47-4257143 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 12 Abba Hillel Silver RD, Sasson Hugi Tower Ramat Gan, Israel 5250606 (Address of Principal Executive Offices) (Zip Code) +972 73 370-4690 (Registrant’s telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of exchange on which registered Common Stock, par value $0.001 per share ODYS The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐ Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 14, 2026, the registrant had 16,777,322 shares of common stock, par value $0.001 per share, of the registrant issued and outstanding. As used in this Quarterly Report and unless otherwise indicated, the terms “Odysight.ai,” “we,” “us,” “our,” or “our Company” refer to Odysight.ai. Unless otherwise specified, all dollar amounts are expressed in United States dollars. ODYSIGHT.AI INC. QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS Page Special Note Regarding Forward-Looking Statements 3 PART 1-FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) 4 Consolidated Balance Sheets 5 Consolidated Statements of Operations and Comprehensive Loss 7 Statements of Stockholders’ Equity 8 Consolidated Statements of Cash Flows 9 Notes to Consolidated Financial Statements 10 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3. Quantitative and Qualitative Disclosures about Market Risk 24 Item 4. Controls and Procedures 24 PART II-OTHER INFORMATION Item 1A. Risk Factors 25 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25 Item 3. Defaults Upon Senior Securities 25 Item 4. Mine Safety Disclosures 25 Item 5. Other Information 25 Item 6. Exhibits 25 SIGNATURES 26 -2- SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about: ● our ability to scale up our operations, including market acceptance and large-scale adoption of our vision-based sensor products; ● the amount and timing of future sales and our long and unpredictable sales cycles; ● our ability to maintain product quality and performance at an acceptable cost and meet technical and quality specifications; ● our ability to accurately estimate the future supply and demand for our solutions and changes to various factors in our supply chain; ● the market for adoption of vision-based sensor technologies; ● compliance with existing laws and regulations and regulatory developments in the United States, Israel, and other jurisdictions, including trade control laws, export authorizations and safety regulations; ● our plans and ability to obtain, maintain, and protect intellectual property rights, including extensions of patent terms, and our ability to avoid infringing the intellectual property rights of others; ● the need to hire additional personnel and our ability to attract and retain such personnel, including key members of our senior management; ● our estimates regarding expenses, backlog, future revenue, capital requirements and need for additional financing; ● our dependence on third parties, including suppliers and strategic partners; ● our dependence on a limited number of customers for a substantial portion of our revenues and the impact if order volumes from existing or anticipated customers do not meet expectations; ● our financial performance and history of operating losses; ● the growth of regulatory requirements and incentives; ● the incorporation of artificial intelligence, or AI, and machine learning, or ML, into our products; ● risks related to product liability claims or product recalls; ● cybersecurity risks and potential data security breaches; ● the overall global economic environment and trade tensions, including the adoption or expansion of economic sanctions, tariffs or trade restrictions; ● challenges and risks related to sales to government entities and highly regulated organizations; ● the impact of competition and new technologies; ● limitations and exclusivity provisions in our customer agreements and restrictions on the use of intellectual property; ● our ability to ensure that our solutions interoperate with a variety of hardware and software platforms; ● our plans to continue to invest in research and develop technology for new products; ● our plans to potentially acquire complementary businesses; ● the impact of future pandemics on our business and on the business of our customers; ● fluctuations in foreign currency exchange rates; ● security, political and economic instability in the Middle East that could harm our business, including due to the security situation in Israel and military conflicts with Iran and terrorist organizations; ● the increased expenses and requirements associated with being a listed public company on the Nasdaq Capital Market, or Nasdaq; and ● risks associated with our dual listing on the Tel Aviv Stock Exchange, or the TASE, including price volatility, liquidity, and regulatory requirements. Forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions, are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Important factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025 (filed on March 19, 2026). Readers are urged to consider these factors carefully in evaluating the forward-looking statements. You should read our Annual Report on Form 10-K for the year ended December 31, 2025, and the documents that we reference in and have filed as exhibits thereto, completely and with the understanding that our actual future results may be materially different from what we expect. Forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission, or the SEC, after the date of this Quarterly Report on Form 10-Q. We qualify all of our forward-looking statements by these cautionary statements. -3- Item 1. Financial Statements ODYSIGHT.AI INC. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2026 Page Interim Condensed Consolidated Financial Statements - in US Dollars (USD) in thousands Interim Condensed Consolidated Balance Sheets (unaudited) 5 Interim Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) 7 Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 8 Interim Condensed Consolidated Statements of Cash Flows (unaudited) 9 Notes to the Interim Condensed Consolidated Financial Statements 10 -4- ODYSIGHT.AI INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 2026 2025 Unaudited USD in thousands Assets CURRENT ASSETS: Cash and cash equivalents 21,763 25,677 Restricted cash - 333 Accounts receivable 104 278 Unbilled receivables 649 615 Inventory 313 50 Other current assets 453 549 Total current assets 23,282 27,502 NON-CURRENT ASSETS: Property and equipment, net 325 346 Operating lease right-of-use assets 639 739 Severance pay asset 299 296 Other non-current assets 96 96 Total non-current assets 1,359 1,477 TOTAL ASSETS 24,641 28,979 The accompanying notes are an integral part of these interim condensed consolidated financial statements. -5- ODYSIGHT.AI INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) March 31, December 31, 2026 2025 Unaudited USD in thousands Liabilities and shareholders’ equity CURRENT LIABILITIES: Accounts payable 446 480 Contract liabilities 133 165 Operating lease liabilities - short term 468 511 Accrued compensation expenses 1,518 1,400 Related parties 88 115 Other current liabilities 331 327 Total current liabilities 2,984 2,998 NON-CURRENT LIABILITIES: Operating lease liabilities - long term 195 259 Liability for severance pay 299 296 Total non-current liabilities 494 555 TOTAL LIABILITIES 3,478 3,553 SHAREHOLDERS’ EQUITY: Common stock, $0.001 par value; 300,000,000 shares authorized as of March 31, 2026 and December 31, 2025, 16,773,407 and 16,357,327 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively 17 17 Additional paid-in capital 89,336 88,418 Accumulated deficit (68,190) (63,009) TOTAL SHAREHOLDERS’ EQUITY 21,163 25,426 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 24,641 28,979 The accompanying notes are an integral part of these interim condensed consolidated financial statements. -6- ODYSIGHT.AI INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Three months ended March 31, 2026 2025 Unaudited USD in thousands (except per share data) REVENUES 82 2,065 COST OF REVENUES 61 1,527 GROSS PROFIT 21 538 RESEARCH AND DEVELOPMENT EXPENSES 2,557 2,487 SALES AND MARKETING EXPENSES 962 396 GENERAL AND ADMINISTRATIVE EXPENSES 1,840 2,215 OPERATING LOSS (5,338) (4,560) FINANCING INCOME, NET 157 295 NET LOSS AND COMPREHENSIVE LOSS (5,181) (4,265) Net loss per ordinary share (basic and diluted, USD) (0.32) (0.29) Weighted average ordinary shares (basic and diluted, in thousands) 16,387 14,575 The accompanying notes are an integral part of these interim condensed consolidated financial statements. -7- ODYSIGHT.AI INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Three Months Ended March 31, 2026 (Unaudited) Common Stock Additional paid-in Accumulated Total Shareholders’ Number Amount capital deficit equity In thousands USD in thousands Balance at January 1, 2026 16,358 $17 $88,418 (63,009) $25,426 Stock based compensation - - 886 - 886 Issuance of shares upon RSU vesting 2 -* -(*) - - Options exercise 6 -* 32 - 32 Warrants exercise 407 -* -(*) - - Net loss - - - (5,181) (5,181) Balance at March 31, 2026 16,773 $17 $89,336 $(68,190) $21,163 Three Months Ended March 31, 2025 (Unaudited) Common Stock Additional paid-in Accumulated Total Shareholders’ Number Amount capital deficit equity In thousands USD in thousands Balance at January 1, 2025 12,613 $13 $64,205 (45,974) $18,244 Stock based compensation - - 806 - 806 Issuance of shares upon RSU vesting 5 -* -(*) - - Issuance of shares, net of issuance cost 3,653 4 20,863 - 20,867 Options exercise 37 -* 113 - 113 Net loss - - - (4,265) (4,265) Balance at March 31, 2025 16,308 $17 $85,987 $(50,239) $35,765 The accompanying notes are an integral part of these interim condensed consolidated financial statements. * Represents an amount less than $1 thousand -8- ODYSIGHT.AI INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 2026 2025 Three months ended March 31, 2026 2025 Unaudited USD in thousands CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (5,181) (4,265) Adjustments to reconcile net loss to net cash used in operations: Depreciation 27 27 Stock based compensation 886 806 Loss from exchange differences 20 29 Interest income in respect of deposits - 12 CHANGES IN OPERATING ASSET AND LIABILITY ITEMS: Decrease in accounts receivable 174 1,318 Decrease (increase) in inventory (263) 203 Decrease in operating lease liability (139) (136) Decrease in right-of-use asset 127 118 Increase in unbilled receivables (34) (96) Increase (decrease) in current and non-current other assets 96 (8) Increase (decrease) in account payables (28) 9 Increase (decrease) in related parties (27) 98 Decrease in contract fulfillment assets - 1,017 Decrease in current and non-current contract liabilities (32) (1,832) Increase in accrued compensation expenses 110 332 Increase in current and non-current other liabilities 10 135 Net cash flows used in operating activities (4,254) (2,233) CASH FLOWS FROM INVESTING ACTIVITIES: Withdrawal of short-term deposits - 310 Purchase of property and equipment (6) (27) Net cash flows provided by (used in) investing activities (6) 283 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of shares, net of issuance cost - 20,909 Proceeds from options exercise 32 113 Net cash flows provided by financing activities 32 21,022 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH (4,228) 19,072 BALANCE OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR 26,010 18,164 PROFIT FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH (19) (29) BALANCE OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD 21,763 37,207 Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet: Cash and cash equivalents 21,763 36,881 Restricted cash - 326 Total cash, cash equivalents and restricted cash 21,763 37,207 SUPPLEMENTAL INFORMATION FOR CASH FLOW: Non-cash activities - Three months ended March 31, 2026 2025 Unaudited USD in thousands SUPPLEMENTAL INFORMATION FOR CASH FLOW: Right-of-use assets obtained in exchange for operating lease liabilities 103 - Termination of right-of-use assets in exchange for derecognition of operating lease obligations (76) - The accompanying notes are an integral part of these interim condensed consolidated financial statements. -9- ODYSIGHT.AI INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – GENERAL: a. Odysight.ai Inc. (the “Company”) was incorporated under the laws of the State of Nevada on March 22, 2013. The Company’s wholly owned subsidiary, Odysight.ai Ltd (“Odysight.ai”), was incorporated in the State of Israel on January 3, 2019, and was merged into the Company on December 31, 2019 in a share exchange transaction, following which the surviving operations of the merged entity were the operations of Odysight.ai. On February 28, 2024, D. View Ltd., a wholly owned subsidiary of the Company was incorporated in the State of Israel to act as a local representative for the defense market. On January 9, 2025, Odysight.ai Eu S.r.l., a wholly owned subsidiary of the Company was incorporated under the laws of Italy. References to the Company include the subsidiaries unless the context indicates otherwise. The Company, through its subsidiaries, provides vision-based solutions for the Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) markets. The Company’s video sensor-based solutions and its embedded software, and AI algorithms are deployed in hard-to-reach locations and harsh environments across a variety of PdM and CBM use cases and allow maintenance and operations teams visibility into areas which are inaccessible under normal operation, or where the operating ambience is not suitable for continuous real-time monitoring. On February 11, 2025, the Company’s common stock began trading on the Nasdaq Capital Market under the symbol “ODYS”. Prior to such date, the Company was quoted on the OTCQB under the same symbol. On April 9, 2026, the Company’s common stock began trading on Tel Aviv Stock Exchange under the symbol “ODYS”. b. Since incorporation of Odysight.ai and through March 31, 2026, the Company accumulated a deficit of approximately $68.2 million and its activities have been funded mainly by its shareholders. The Company’s management believes the Company’s cash and cash resources will allow the Company to fund its operating plan through at least the next 12 months from the filing date of these interim consolidated financial statements. However, the Company expects to continue to incur significant research and development and other costs related to its ongoing operations, requiring the Company to obtain additional funding in order to continue its future operations until becoming profitable. c. On February 28, 2026, the United States and Israel involving attacks in Iran. In response, Iran launched ballistic missiles and unmanned aerial vehicles (UAVs) toward Israel and certain states in the Persian Gulf region. These events have resulted in civilian casualties and property damage in Israel. Additionally, Hezbollah, a terrorist organization in Lebanon, joined the attacks against Israel and Israel has started military operations in Lebanon. Following the commencement of the operation, Israel’s Home Front Command announced a “special home front situation” and updated safety guidelines that include, among other measures, restrictions on passenger flights, limitations on gatherings, broad reserve recruitment, and temporary closure of certain businesses, which has contributed to a partial reduction in economic activity in Israel. As a result of these guidelines, the Company’s offices in Israel were closed on certain days during this period. On April 8, 2026, the United States and Iran agreed to a temporary ceasefire with the aim of reaching a permanent agreement and ending the war and on April 16, 2026, a cessation of hostilities was announced between Israel and Lebanon. However, the military operation in Lebanon against Hezbollah is still ongoing and the Iran ceasefire remains fragile, with reports of continued military operations by both sides. As a result of the above-described events, the Company experienced delays in customer orders and in deliveries in existing projects. In the Company’s assessment, should the security situation continue for an extended period and/or escalate, its consequences may have a material adverse effect on the Israeli economy, including on the Company. Given that this is a dynamic event characterized by significant uncertainty, the extent of the impact of the security situation on the Company’s future operations is currently unknown. -10- ODYSIGHT.AI INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES a. Unaudited Interim Financial Statements The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the interim condensed consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. b. Principles of Consolidation The accompanying interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. c. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, inventory impairment and stock-based compensation, as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates. d. Significant Accounting Policies The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements. -11- ODYSIGHT.AI INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – LEASES: a. Omer office space In December 2020, Odysight.ai entered into a lease agreement for office space in Omer, Israel (the “Original Space”), with the 36-month term for such agreement beginning on January 1, 2021. In March 2021, Odysight.ai entered into a lease agreement for additional office space in Omer, Israel (the “Additional Space”), with the term for such agreement ending on December 31, 2023. On June 25, 2023, Odysight.ai entered into an amendment to these agreements pursuant to which the lease for the Additional Space was shortened and ended on June 30, 2023, and the lease for the Original Space was extended for an additional five years until December 31, 2028. It was also agreed that Odysight.ai has an option to terminate the agreement for the Original Space with six months’ notice during the first three years. Monthly lease payments under the agreement for the Original Space are approximately $7 thousand. In December 2025, the Company provided six months’ notice indicating its intention to terminate the lease agreement as of May 2026. In March 2026, the Company signed a two-year lease agreement for alternative office space in Omer. Monthly lease payments under the agreement are approximately $5 thousand in the first year and approximately $6 thousand in the second year. b. Ramat Gan office space In May 2023, Odysight.ai entered into a lease agreement for office space in Ramat Gan, Israel. The agreement is for 48 months beginning on July 1, 2023, and the Company has an option to extend the lease period for an additional two years. The Company does not currently expect to extend the lease period. Monthly lease payments under the agreement are approximately $25 thousand. Odysight.ai subleases part of the office space in Ramat Gan to a third party for approximately $8 thousand per month. c. The Company leases vehicles for use by certain of its employees in Israel. The lease terms are typically for three-year periods. Supplemental cash flow information related to operating leases was as follows: SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO OPERATING LEASES 2026 2025 Three months ended March 31, 2026 2025 USD in thousands Cash paid for amounts included in the measurement of lease liabilities 156 147 As of March 31, 2026, the Company’s operating leases had a weighted average remaining lease term of 0.76 years and a weighted average discount rate of 6% for vehicles and 12.8% for offices. The maturities of lease liabilities under operating leases as of March 31, 2026 are as follows: SCHEDULE OF MATURITIES LEASE LIABILITIES UNDER OPERATING LEASES Operating leases USD in thousands Remainder of 2026 375 2027 274 2028 58 Total future lease payments 707 Less imputed interest (44) Total lease liability balance 663 -12- ODYSIGHT.AI INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 – OTHER CURRENT LIABILITIES: Other current liabilities consisted of the following: SCHEDULE OF OTHER CURRENT LIABILITIES March 31, 2026 December 31, 2025 USD in thousands Government authorities 91 90 Accrued expenses 212 209 Other payables 28 28 Total other current liabilities 331 327 NOTE 5 – EQUITY: a. Private and Public Placements 1. On March 29, 2021, the Company issued to certain investors, including Moshe (Mori) Arkin, a major stockholder and director of the Company, an aggregate of 2,469,156 units in exchange for an aggregate purchase price of $20 million. Each such unit consisted of (i) one share of the Company’s common stock and (ii) one warrant to purchase one share of the Company’s common stock with an exercise price of $10.35 per share. Each such warrant was exercisable until March 31, 2026 and subject to customary adjustments. Pursuant to the terms of the foregoing warrants, following April 1, 2024, if the closing price of the Company’s common stock equaled or exceeded 135% of the aforementioned exercise price (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions after the issue date of the warrants) for any thirty (30) consecutive trading days, the Company could force the exercise of the warrants, in whole or in part, by delivering to these investors a notice of forced exercise. On March 31, 2026 all warrants expired. 2. On March 16, 2023, the Company entered into stock purchase agreements for a private placement with (i) Moshe (Mori) Arkin and (ii) The Phoenix Insurance Company Ltd. (“Phoenix Insurance”) and Shotfut Menayot Israel – Phoenix Amitim (“Phoenix Amitim”), in connection with the sale and issuance of an aggregate of 3,294,117 units, at a purchase price of $4.25 per unit, and for an aggregate purchase price of $14 million. Each unit consisted of: (i) one share of the Company’s common stock and (ii) one warrant to purchase one share of the Company’s common stock. The warrants are immediately exercisable, expire three years from the date of issuance and are subject to customary adjustments. During March 2026, all warrants were exercised on a cashless basis, and 407,497 shares were issued accordingly. 3. On February 12, 2025, the Company completed a U.S. underwritten public offering issuing 3,307,692 shares of the Company’s common stock at a price of $6.50 per share. The Company also granted the underwriters a 30-day over-allotment option to purchase up to an additional 496,153 shares at a purchase price of $6.50 per share. On February 14, 2025, the Company sold an additional 345,432 shares of common stock as a result of a partial exercise of the over-allotment option at the public offering price of $6.50 per share. Following the exercise of the over-allotment option, the Company sold a total of 3,653,124 shares of common stock, generating gross proceeds of approximately $23.7 million, prior to the deduction of underwriting discounts, commissions and estimated offering expenses. After deducting issuance costs, the Company received proceeds of approximately $20.9 million. -13- ODYSIGHT.AI INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – EQUITY (continued): b. Stock-based compensation for employees, directors and service providers: In February 2020, the Company’s Board of Directors approved the 2020 Share Incentive Plan (the “2020 Plan”). The 2020 Plan initially included a pool of 580,890 shares of common stock for grant to Company employees, consultants, directors and other service providers. On March 15, 2020, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the 2020 Plan by an additional 64,099 shares of common stock. On June 22, 2020, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the 2020 Plan by an additional 401,950 shares of common stock. During the second quarter of 2021, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the 2020 Plan by an additional 777,778 shares of common stock. During the first quarter of 2023, the Company’s Board of Directors approved an increase to the option pool pursuant to the 2020 Plan by an additional 1,000,000 shares of common stock. In June 2024, the Company’s Board of Directors approved the 2024 Share Incentive Plan (the “2024 Plan”). With adoption of the 2024 Plan, the Company ceased making new awards under the 2020 Plan. The 2024 Plan initially included a pool of 234,484 shares of common stock, representing the number of shares remaining available for grant under the 2020 Plan. These shares are available for future grant to Company employees, consultants, directors and other service providers. Shares that were subject to awards granted under either the 2020 Plan or the 2024 Plan that have expired or were cancelled or become un-exercisable for any reason without having been exercised in full shall become available for future grant under the 2024 Plan. In July 2024, the Company’s Board of Directors approved an increase to the 2024 Plan’s option pool by an additional 850,000 shares of common stock. Also in July 2024, the Company’s stockholders approved the 2024 Plan. In December 2025, the Company’s Board of Directors approved an increase to the 2024 Plan’s option pool by an additional 777,000 shares of common stock. The 2020 Plan and 2024 Plan each provide for the grant of stock options (including incentive stock options and nonqualified stock options), shares of common stock, restricted shares, restricted share units, and other share-based awards. Stock option activity The following table summarizes stock option activity for the three months ended March 31, 2026: SCHEDULE OF STOCK OPTION ACTIVITY For the Three months ended March 31, 2026 Amount of options Weighted average exercise price $ Outstanding at beginning of period 3,340,514 3.95 Granted 284,000 4.97 Exercised (6,500) 4.80 Forfeited (97,601) 3.83 Outstanding at end of period 3,520,413 4.03 Vested at end of period 2,643,860 3.76 The Company estimates the fair value of stock option awards on the grant date using the Black-Scholes option pricing model. The weighted-average grant date fair value per option granted during the three months ended March 31, 2026, was $3.86. The fair value of each award is estimated using Black-Scholes option-pricing model based on the following assumptions: underlying value of shares of $4.64-$5.14, exercise price of $4.70-$5.14, expected volatility of 80.21%-86.88%, term of the options of 4.375-10 years and risk-free interest rate of 3.74%-4.08%. On February 19, 2026, the Company’s Board of Directors approved a three-year extension of the term of 407,034 options that were originally set to expire in 2027 (the “Designated Options”). As a result of this extension, the Company estimated the fair value of the Designated Options both before and after the modification and recognized approximately $400 thousand in stock-based payment expenses. The fair value of the Designated Options was estimated using the Black-Scholes option-pricing model, based on the following assumptions: underlying value of shares of $5.14, exercise price of $2.61, expected volatility of 84.89%-90.02%, term of the options of 0.98-4.34 years and risk-free interest rate of 3.49-3.575%. -14- ODYSIGHT.AI INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – EQUITY (continued): Restricted stock unit (“RSU”) activity Each RSU vests based on continued service to the Company, generally over three years. The grant date fair value of the award is recognized as stock-based compensation expense over the requisite service period. The fair value of restricted stock units was estimated on the date of grant based on the fair value of the Company’s common stock. The following table summarizes RSU activity for the three months ended March 31, 2026: SCHEDULE OF RESTRICTED STOCK UNIT (“RSU”) ACTIVITY For the Three months ended March 31, 2026 Amount of RSUs Weighted Average Grant Date Fair Value per Share $ Outstanding at beginning of period 4,167 3.00 Granted - - Forfeited - - Vested (2,083) 3.00 Unvested and Outstanding at end of period 2,084 3.00 The following table sets forth the total stock-based payment expenses resulting from options and RSUs granted, included in the statements of operation and comprehensive income: SCHEDULE OF STOCK-BASED PAYMENT EXPENSE 2026 2025 Three months ended March 31, 2026 2025 USD in thousands Cost of revenues - (2) Research and development 113 246 Sales and marketing expenses 139 103 General and administrative 634 459 Total expenses 886 806 -15- ODYSIGHT.AI INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 – REVENUES: a. Disaggregation of revenue (1) During the second quarter of 2022, the Company completed the development of a customer-specific project for a Fortune 500 medical company customer (the “Client”) and moved from the project development phase to its production phase. Through March 30, 2025, the Company recognized development services revenues and costs that had been previously deferred based on the expected manufacturing term of the product, which the Company estimated originally at seven years. During the first quarter of 2025, due to the fact that the Company has not received a purchase order from the Client and did not expect to receive such order, the Company decided to fully derecognize the fulfilment asset and contract liability associated with the Client, in the amount of $957 thousand and $1,690 thousand, respectively. (2) During the three months ended March 31, 2026, the Company recognized revenues from customization and development services in which the performance obligation is satisfied over time in the amount of $77 thousand. b. Unbilled receivables, Contract fulfillment assets and Contract liabilities: Unbilled receivables represent revenue recognized for goods or services delivered to a customer, but not yet invoiced. The change in unbilled receivables: SCHEDULE OF CHANGE IN UNBILLED RECEIVABLES March 31, December 31, 2026 2025 USD in thousands Balance at beginning of period 615 185 Contract revenues recognized during the period 34 430 Balance at end of period 649 615 The change in contract fulfillment assets: SCHEDULE OF CONTRACT FULFILLMENT ASSETS AND CONTRACT LIABILITIES March 31, December 31, 2026 2025 USD in thousands Balance at beginning of period - 1,017 Contract fulfilment assets, Balance at beginning of the period - 1,017 Contract costs recognized during the period - (1,017) Balance at end of period - - Contract fulfilment assets, Balance at end of the period - - Contract liabilities include deferred service and advance payments. The change in contract liabilities: March 31, December 31, 2026 2025 USD in thousands Balance at beginning of period 165 2,075 Contract liabilities, Balance at beginning of the period 165 2,075 Deferred revenue relating to ne