Interim report
Page 1
1 This is an English translation of the information included in the approved financial statements. In the event of any discrepancy between the original Hebrew and the translation to English, the Hebrew version alone will prevail. Board of Directors’ Report on the State of the Corporation’s Affairs For the Six-Month Period Ended on June 30, 2025 The Board of Directors of NextVision Stabilized Systems Ltd. (hereinafter: the “ Company”) is pleased to hereby submit the Board of Directors’ Report on the state of the Corporation’s affairs as of June 30, 2025 (hereinafter: the “Report Date” or the “Date of the Report”) and for the six- month period ended on June 30, 2025 (hereinafter: the “Report Period”), prepared in accordance with the Securities Regulations (Periodic and Immediate Reports), 5730-1970 (hereinafter: the “Reporting Regulations”). This Report is concise in scope and has been prepared based on the assumption that the reader has access to the Company’s Annual Reports for 2024 (Reference No.: 2025-01-016228), including the Board of Directors’ Report on the state of the Company’s affairs for the year ended on December 31, 2024 (hereinafter: the “Periodic Report”). Chapter A – Explanations of the Board of Directors Regarding the State of the Company’s Affairs Brief Description of the Company and Its Business Environment 1. General The Company was incorporated and registered in Israel on April 1, 2009 as a private limited liability company under the name NextVision Stabilized Systems Ltd. (its current name). Since its incorporation, the Company has been a technology company engaged in the development, manufacturing, and marketing of stabilized day and night imaging solutions for ground, aerial and maritime platforms, such as micro and mini UAVs and drones. The Company sells its products to customers who are systems providers that sell their products to the end user. The Company has several products (cameras and accessories) within a weight range of approximately 2 kg to approximately 115 grams. The Company has developed a unique image stabilization “engine,” based on a registered patent, which enables it to produce stabilized cameras with world-leading size/weight-to-performance ratios, at competitive prices and with very high reliability.
Page 2
2 In contrast to some of its competitors who attempt to miniaturize existing technology, the Company chose a unique solution by thinking “outside the box,” combining mechanical stabilization (small gimbals) and electronic stabilization (hardware “engine”) that allows it to stabilize the image in real time, thereby maintaining uniqueness and a significant gap from its competitors. The requirement for image stabilization becomes more challenging as the camera becomes smaller and lighter, and as zoom requirements increase. The Company’s technology enables deep zoom from moving platforms while still providing the user with a stable image. The ratio of size and weight to performance and competitive pricing is among the best in the market. The cameras are operated by an integrated software package that enables the company's customers to maximize economic benefit. The technology developed by the Company includes the development of day cameras, night cameras, miniaturized gimbals, communication, geo-pointing capabilities, trackers, and additional functionalities that meet the needs of its customers and position the Company as a one-stop shop for manufacturers of ground, aerial and maritime platforms that require stabilized zoom optical systems. In addition to cameras, the Company develops complementary products that significantly reduce the integration time of the cameras into its customers’ various platforms, thereby saving its customers considerable costs and enabling faster time to market. The Company invests a great deal of time and resources in recruiting personnel, developing technology, capabilities, and new products in order to maintain its competitive advantage in the market and optimally meet its customers’ needs. There is a growing global use of unmanned systems in modern warfare, as world leaders take steps to replenish their weapons stockpiles. Global defense spending is reaching new heights. For example, to the best of the company's knowledge, the U.S. military has begun emphasizing low- cost drones in large quantities, backed by substantial budgets. Accordingly, and again to the best of the company's knowledge, total U.S. defense expenditures in 2026 are expected to reach approximately $1 trillion. Additionally, NATO's defense spending has significantly increased in 2024 and 2025. It should be noted that the U.S. government maintains a list of approved vendors from which recognized government customers are authorized to purchase. The company is included in this list as an approved vendor under the Blue UAS Framework. Furthermore, to the best of the company's knowledge, a recent presidential executive order was signed to strengthen drone dominance. In the company's assessment, its products are specifically designed to meet the needs of unmanned systems in the modern world, leading the market with field-proven solutions that are relevant to a wide range of missions.
Page 3
3 Disclosure Regarding the Effects of the Iron Swords War and Operation “Rising Lion” On October 7, 2023, following a surprise attack by the Hamas terrorist organization from the Gaza Strip, the Government of Israel declared the Iron Swords war. Following the attack from the Gaza Strip, another attack began in northern Israel by the Hezbollah terrorist organization from Lebanon, and tensions rose in other arenas as well. As part of its response to the threats of the Iron Swords war, the Government of Israel ordered the evacuation of dozens of communities located in the south of the country, around the Gaza Strip, and in the north of the country along the border with Lebanon, and imposed restrictions on various gatherings, workplace activities, and educational activities in accordance with Home Front Command guidelines. In addition, many civilians were called up for extended periods of reserve duty. These factors led to a slowdown and reduction in business activity in Israel, due in part to business closures, workforce shortages, and disruptions to the supply chain. Potential fluctuations in commodity prices, foreign exchange rates, availability of materials, availability of labor, local services, and access to local resources may affect entities whose primary activity is with or in Israel. In July 2025, the Research Department of the Bank of Israel updated its macroeconomic forecast.1 According to the said report, GDP is expected to grow by 3.3% in 2025 and by 4.6% in 2026. The inflation rate for the coming four quarters (ending in the second quarter of 2026) is expected to be 2.2%. During 2025, it is expected to be 2.6%, and during 2026, 2.0%. According to the macroeconomic forecast of the Bank of Israel’s Research Department, the Bank of Israel interest rate is expected to average 3.75% in the second quarter of 2026. According to the Report, the forecast was formulated after a ceasefire was declared at the end of Operation “Rising Lion,” and based on the assumption that it will hold. As for the fighting in Gaza, the forecast was based on the assumption that the currently discussed ceasefire agreement will result, as of July, in the absence of intense combat in Gaza. The current forecast reflects a slight moderation of estimates regarding the impact of U.S. import tariffs announced in April 2025. The forecast is also characterized by a particularly high level of uncertainty, with both positive and negative potential developments, in the geopolitical arena as well as regarding the U.S. administration’s tariff program. At this stage, there is also significant uncertainty regarding the government’s decisions concerning the state budget for 2025 and 2026. On August 12, 2024, Fitch downgraded Israel’s credit rating to A (with a negative outlook). On September 27, 2024, the international rating agency Moody’s announced a two-notch downgrade of Israel’s credit rating from A2 to Baa1 with a negative outlook. This came after the agency announced on February 9, 2024 a downgrade from A1 to A2 with a continued negative outlook. A few days after Moody’s downgrade, the credit rating agency S&P also announced a one-notch 1 See on the website of Bank of Israel, at: https://www.boi.org.il
Page 4
4 downgrade of Israel’s credit rating from A+ to A and added a negative outlook. This followed a previous downgrade by S&P earlier in 2024. Additionally, on October 1, 2024, Moody’s announced a one-notch downgrade of the credit ratings of Israel’s five largest banks from A3 to Baa1 and added a negative outlook, following the downgrade of the State of Israel’s credit rating. According to Moody’s, the downgrades and the negative outlook reflect both the negative outlook on the credit rating of the Government of Israel, and the concern for deterioration in the condition of the banks themselves in the event of further damage to the economy, should the impacts of the war worsen. On June 13, 2025, the State of Israel launched a military operation against Iran, called “Rising Lion” aimed at striking and destroying Iranian nuclear and weapon infrastructure. During the 12 days of fighting, the IDF struck strategic targets across Iran, destroyed vital facilities related to the Iranian nuclear program and ballistic missile arrays, and eliminated senior figures in the Iranian defense establishment. In response to the operation, Iran launched hundreds of ballistic missiles and unmanned aerial vehicles at military and civilian targets in Israel. The attacks caused widespread infrastructure damage, significant property damage, approximately 30 fatalities among Israeli and foreign civilians, and hundreds of injuries. On June 24, 2025, following an American strike within Iranian territory, a ceasefire agreement was reached between the parties. During Operation “Rising Lion,” the Israeli government closed Israel’s airspace for a period of approximately two weeks. During this period, it was not possible to receive goods from suppliers or to ship goods to the Company’s customers abroad by air. At the end of the operation, a backlog formed with the air freight companies, which cleared about a week later. Following the conclusion of the operation and the resumption of activity by the air freight companies, most of the goods that had not yet been shipped to the Company’s customers were released (during the last week of June, and some even during July). As the Company has several customers with payment terms, goods shipped at the end of June were paid for during the month of July. Since the beginning of the war, there has been an increase in orders for the Company’s cameras and other products from its customers. In addition, last year, and before the war broke out, the Company increased its inventory in order to maintain flexibility, responsiveness, and the ability to meet the growing demand for the Company’s products from its customers. The Company is continuously increasing its production capacity in order to meet the increase in demand and at the same time continue supplying its customers’ orders on time. Furthermore, due to global geopolitical tensions that are affecting, inter alia, supply chains, and as a precautionary measure only, the Company has decided to stock up on various components which it identified as potentially facing shortages. It should be clarified that the Company is acting to execute long-term orders, maintain high inventory levels, increase the number of suppliers, avoid reliance on a single supplier to the extent possible, and maintain ongoing contact with its suppliers.
Page 5
5 As of this date, the war and/or Operation “Rising Lion” have no material impact on the Company’s results or on the Company’s ability to supply its customers’ orders on time. The Company continues to examine from time to time the effects of the economic situation and the warfare on its business operations. Nevertheless, in light of the uncertainty regarding the scope of the fighting, the duration of the war, the extent of the reserve duty call-ups, the continued supply of inventory from suppliers, market volatility, further steps that may be taken by the Government of Israel, and the effects of other factors, including on the business activity of the Company’s customers, the Company is currently unable to accurately assess the scope and nature of any additional future impacts of the war on its results. The Company’s assessments as detailed above regarding the future effects of the war and/or Operation “Rising Lion” in Israel constitute forward-looking information, as defined in the Securities Law, based on the Company’s estimations as of the date of this Report. The actual impact of the war on the Company’s condition and the macroeconomic situation and/or monetary policy in Israel may differ materially from the Company’s assessments and is not solely under the Company’s control. This is due, inter alia, to a potential economic slowdown that may develop in the State of Israel, escalation of the war, or one or more of the above- mentioned factors related to the war, as well as macroeconomic changes that may affect the Company’s operations. Tariffs on Imported Goods to the United States In April 2025, the U.S. administration announced a plan to impose tariffs on goods imported to the United States, which may also impact Israel’s economy. According to the macroeconomic forecast of the Research Department of the Bank of Israel from April 2025, global tariff increases are expected to lead to a 4% decrease in global trade volume by the end of 2026 (compared to a no- tariff scenario). The plan includes two main components: A. A uniform tariff of 10% on all imports to the U.S.; B. Additional tariffs at varying rates on imports from countries with a significant trade surplus with the U.S. Under this plan, as of the start of implementation, the tariff imposed on Israeli goods stood at 10% under the uniform tariff on all imports to the U.S. As of August 7, 2025, imports from Israel to the United States are subject to a total tariff of 15% (10% uniform + 5% variable by country). Furthermore, under the tariff policy, there is a customs exemption for goods purchased by subcontractors for the U.S. government. Although part of the Company’s revenues derive from exports to the United States, the Company estimates that the potential impact of the new tariff policy on its business results is minor.
Page 6
6 The information and data detailed in this section above, regarding the Company’s assessment concerning the impact of the tariffs on the Company’s results, constitute forward- looking information, as defined in the Securities Law, and are not solely under the Company’s control. The information and data are based on information currently in the Company’s possession and on publications written and released by professional entities in connection with the matters discussed in this paragraph above. The information and data are estimates only, which may not materialize or may materialize only partially or differently, even materially, due to external factors not under the Company’s control, including changes in U.S. and Israeli policy and any of the risk factors detailed in the Company’s 2024 Periodic Report. In light of the foregoing, actual results may differ from the above assessments and even differ materially due to external factors affecting the Company’s area of operations. Changes in Exchange Rates2 According to the Monetary Policy Report of the Bank of Israel for the first half of 2025, the Monetary Committee left the interest rate unchanged at a level of 4.5% in all its decisions during the first half. During the first half of 2025, trading in the financial markets continued to be characterized by volatility, which was influenced by both domestic and global uncertainty. In June, upon the conclusion of Operation “Rising Lion”, Israel’s risk premium, as measured by CDS spreads and the spread between Israeli and U.S. dollar-denominated government bonds, declined significantly but remained elevated compared to its level prior to the Iron Swords War. Domestic stock indices rose sharply, yields on shekel-denominated government bonds declined significantly, and the shekel strengthened notably. During the reviewed half-year, business credit continued to expand in line with the trend, with default rates remaining stable at low levels across all sectors. The information and data detailed in this Section above, and the factors influencing the Company’s operations, include analyses and forecasts that constitute forward-looking information, as defined in the Securities Law, which is not solely under the Company’s control. Such information and data are based on information currently in the Company’s possession and on publications written and released by professional parties in connection with the Company’s area of operations as of the date of this Report. Such information and data are only estimates, which may not materialize or may materialize partially or differently, inter alia due to changes in the field of activity and the factors influencing it. In 2 https://www.boi.org.il/publications/regularpublications/monetary-policy-reports/%D7%93%D7%95%D7%97- %D7%94%D7%9E%D7%93%D7%99%D7%A0%D7%99%D7%95%D7%AA- %D7%94%D7%9E%D7%95%D7%A0%D7%99%D7%98%D7%A8%D7%99%D7%AA- %D7%94%D7%9E%D7%97%D7%A6%D7%99%D7%AA- %D7%94%D7%A9%D7%A0%D7%99%D7%99%D7%94-%D7%A9%D7%9C-2023/
Page 7
7 light of the above, actual results may differ from the estimates detailed above and may differ materially in connection with the external factors influencing the Company’s field of activity. The Impact of the Russia–Ukraine War on the Company’s Operations The Russia–Ukraine war, which began during the month of February in the year 2022, the concern of European countries regarding aggressive conduct by Russia toward them, as well as the “heating up” of the global defense market, led a significant number of governments to declare their intention to significantly increase their defense and military procurement budgets. The war in Ukraine, like the Iron Swords War, underscored the acceleration in the use of UA Vs and small observation drones for field use and suicide tools. In light of this trend, it appears that there is a global understanding that future wars are expected to involve increased use of aerial systems, and that countries must equip themselves with such tools. The Company is in fact experiencing an increase in demand for the solution it provides to its customers in all sectors and anticipates continued interest in its products. The information regarding the Company’s expectations in connection with the increase in demand for its products following the war in Ukraine constitutes forward-looking information, as defined in the Securities Law, which is not solely under the Company’s control. Such information is based on information currently in the Company’s possession and on publications written and released by professional parties in connection with the Company’s field of operations as of the date of this Periodic Report. This information is only an estimate, which may not materialize or may materialize partially or differently, inter alia due to changes in the field of activity and the factors influencing it. In light of the above, actual results may differ from the estimate detailed above and may even differ materially in connection with the external factors influencing the Company’s field of activity. 2. Development of the Company’s Business During the Report Period 2.1. The Company is a growing technology company. The Company continues to market its products worldwide, and each year new customers are added to its customer base. Following many changes in the market, both technological and regulatory, there is a trend of growth in the number of small platforms requiring stabilized imaging solutions. 2.2. During the Report Period, the Company’s sales grew by approximately 32% compared to the corresponding period last year. During the Report Period, the number of customers to whom the Company sells stood at a total of 154 customers, compared with 137 customers in the corresponding period last year. As of the Report Date, the Company’s order backlog stands at approximately USD 110.4 million. 2.3. On January 7, 2025, the Company received an order from a third party, which is not related to the Company and/or to its Interested Parties, for the purchase of cameras and additional products of the Company for total consideration of approximately USD 12.1 million
Page 8
8 (excluding V A T). For more details, see the Company’s Immediate Report dated January 7, 2025 (Reference No.: 2025-01-001890), the contents of which are incorporated into this Board of Directors’ Report by way of reference. 2.4. On January 16, 2025, the Company received two orders from two customers, which are not related to the Company and/or to its Interested Parties, for the purchase of cameras and additional products of the Company for total consideration of approximately USD 3 million (excluding V A T). For more details, see the Company’s Immediate Report dated January 16, 2025 (Reference No.: 2025-01-004754), the contents of which are incorporated into this Board of Directors’ Report by way of reference. 2.5. On February 3, 2025, the Company received an order from a third party, which is not related to the Company and/or to its Interested Parties, for the purchase of cameras and additional products of the Company for total consideration of approximately USD 11.2 million (excluding V A T). For more details, see the Company’s Immediate Report dated February 4, 2025 (Reference No.: 2025-01-008503), the contents of which are incorporated into this Board of Directors’ Report by way of reference. 2.6. On February 11, 2025, the Company received an order from a third party, which is not related to the Company and/or to its Interested Parties, for the purchase of the Company’s cameras for total consideration of approximately USD 1 million (excluding V AT). For more details, see the Company’s Immediate Report dated February 12, 2025 (Reference No.: 2025-01- 010172), the contents of which are incorporated into this Board of Directors’ Report by way of reference. 2.7. On February 13, 2025, the Company received an order from a third party, which is not related to the Company and/or to its Interested Parties, for the purchase of the Company’s cameras for total consideration of approximately USD 3.2 million (excluding V AT). For more details, see the Company’s Immediate Report dated February 16, 2025 (Reference No.: 2025-01- 010758), the contents of which are incorporated into this Board of Directors’ Report by way of reference. 2.8. On February 20, 2025, the Company received an order from a third party, which is not related to the Company and/or to its Interested Parties, for the purchase of the Company’s cameras for total consideration of approximately USD 1.75 million (excluding V AT). For more details, see the Company’s Immediate Report dated February 20, 2025 (Reference No.: 2025-01- 011848), the contents of which are incorporated into this Board of Directors’ Report by way of reference. 2.9. On March 4, 2025, the Company received a purchase order from a third party that is not related to the Company and/or its Interested Parties, for the purchase of the Company’s cameras in exchange for a total amount of approximately USD 1.34 million (excluding V A T).
Page 9
9 For further details, see the Company’s Immediate Report dated February 5, 2025 (Reference No.: 2025-01-014518), while the information therein is included in this Board of Directors’ Report by way of reference. 2.10. On March 13, 2025, the Company received a purchase order from a third party that is not related to the Company and/or its Interested Parties, for the purchase of the Company’s cameras in exchange for a total amount of approximately USD 2.15 million (excluding V A T). For further details, see the Company’s Immediate Report dated March 12, 2025 (Reference No.: 2025-01-016678), while the information therein is included in this Board of Directors’ Report by way of reference. 2.11. On October 16, 2024, the Company entered into an agreement with an existing customer of the Company, and on December 27, 2024, a purchase order was received under said agreement, for the purchase of cameras and additional products of the Company, for a total amount of approximately USD 30 million (hereinafter: the “ Consideration” and the “Agreement”, respectively). It is clarified that the commencement of the supply of products to the customer is subject to receipt of regulatory approval for the transaction, which has not yet been received. Such approval also depends on third parties (the customer and its end customer) who are not under the control of the Company. To the extent that regulatory approval for the transaction is not received, the customer will have the option to cancel the Agreement without penalty. The Company’s management made use of the authority granted to it under Article 36(b) of the Securities Regulations (Periodic and Immediate Reports), 5730–1970, to defer reporting regarding the Company’s engagement in the Agreement, due to concerns that publication of an Immediate Report regarding the engagement may have thwarted the transaction in its entirety and/or worsened its terms and materially harmed the transaction terms, thereby causing significant harm to the Company. Once the reason for the reporting deferral was no longer applicable, the impediment to reporting the engagement in the Agreement was removed, as stated in this Immediate Report. For further details, see the Company’s Immediate Report dated March 13, 2025 (Reference No.: 2025-01-016909), while the information therein is included in this Board of Directors’ Report by way of reference. 2.12. On March 9, 2025, the Company’s Board of Directors resolved that the Company’s reporting threshold shall be set at orders of at least NIS 2 million, instead of the previous threshold of NIS 1 million. 2.13. On March 24, 2025, the Company allocated 273,000 options to employees and officers of the Company. For further details, see the Company’s Immediate Reports dated March 24, 2025 (Reference No.: 2025-01-019785) and March 10, 2025 (Reference No.: 2025-01-015586), while the information therein is included in this Board of Directors’ Report by way of reference.
Page 10
10 2.14. On March 26, 2025, the Company distributed a dividend to its shareholders in the amount of approximately USD 33,198 thousand. For further details, see the Company’s Immediate Reports dated March 10, 2025 and March 16, 2025 (Reference Nos.: 2025-01-015634 and 2025-01-017346, respectively), while the information therein is included in this Board of Directors’ Report by way of reference. 2.15. On April 3, 2025, the Company received a purchase order from a third party that is not related to the Company and/or its Interested Parties, for the purchase of the Company’s cameras in exchange for a total amount of approximately USD 6 million (excluding V A T). On June 15, 2025, the Company received an update from the customer regarding the order, stating that the customer increased the order by an additional amount of approximately USD 7.77 million, such that the total consideration for the order stands at approximately USD 13.77 million (excluding V A T). It is clarified that the other terms of the order remain unchanged, including the payment terms and the delivery dates. For further details, see the Company’s Immediate Reports dated April 3, 2025 and June 16, 2025 (Reference Nos.: 2025-01-024475 and 2025- 01-042730, respectively), while the information therein is included in this Board of Directors’ Report by way of reference. 2.16. On April 29, 2025, the General Meeting of the Company’s shareholders approved the following matters: A. Approval of the Company’s Compensation Policy. B. Allocation of non-tradable options to Mr. Chen Golan, Chairman of the Company’s Board of Directors. C. Allocation of non-tradable options to Mr. Boris Kipnis, Director and Chief Technology Officer. D. Allocation of non-tradable options to Mr. Michael Grosman, Chief Executive Officer of the Company. On May 5, 2025, the Company allocated the options to the officers listed in this Section above. For further details, see the Company’s Immediate Reports dated May 5, 2025, April 29, 2025, April 24, 2025, and March 9, 2025 (Reference Nos.: 2025-01-031210, 2025-01- 030555, 2025-01-029114, and 2025-01-015589, respectively), while the information therein is included in this Board of Directors’ Report by way of reference. 2.17. On May 18, 2025, the Company’s Compensation Committee and Board of Directors approved the following matters: A. Allocation of 9,000 options to Mr. Alex Lavie, Chief Financial Officer of the Company, as well as an increase in his salary to NIS 48 thousand (instead of NIS 43.5 thousand).
Page 11
11 B. Allocation of 9,000 options to Mr. Liran Reller, Vice President of Engineering, as well as an increase in his salary to NIS 55 thousand (instead of NIS 45 thousand). C. Allocation of 13,000 options to Mr. Yuval Evron, Chief Operating Officer of the Company. D. Allocation of 52,000 options to Company employees, exercisable into 52,000 ordinary shares of the Company. On June 5, 2025, the Company allocated the options listed in this Section above to the officers subordinate to the CEO. 2.18. On June 12, 2025, the Company received a purchase order from a third party that is not related to the Company and/or its Interested Parties, for the purchase of the Company’s cameras in exchange for a total amount of approximately USD 2 million (excluding V AT). For further details, see the Company’s Immediate Report dated June 15, 2025 (Reference No.: 2025-01- 042459), while the information therein is included in this Board of Directors’ Report by way of reference.
Page 12
12 1. Board of Directors’ Explanations for State of the Company’s Business, Results of Activity, Equity and Cash Flows 1.1. Financial condition The financial data detailed below is based on the reviewed and audited financial statements of the Company, prepared in accordance with International Financial Reporting Standards (IFRS). Below are the main developments that occurred in the items of the Statement of Financial Position (in thousands of USD): Section Balance as of (USD thousands) Explanations of Company’s Board of Directors to ChangesJune 30 December 31, 20242025 2024 Cash 42,580 89,138 74,708 See cash flow analysis in Section 3.3 below. Short term deposits 67,424 - 47,903 Due to the drop in dollar interest rates and the Company’s desire to maintain high interest, the Company closed deposits for a period of up to one year. Trade receivables 17,560 8,508 6,374 The increase in trade receivables compared to the same period last year results from delays in releasing goods due to Rising Lion Operation during which Israel’s airspace was closed for two consecutive weeks, preventing shipment of goods to customers abroad. Once the operation ended, most goods were released during the last week of June. Since the Company has several customers with payment terms, the goods sent at the end of June were paid for in July. Current taxes receivable 516 - 1,054 The current taxes receivable arise from higher advance payments compared to the actual tax provision for 2025. Other accounts receivable 4,819 1,929 1,840 The increase compared to the same period last year is primarily due to an increase in advances to suppliers for procurement needs for 2025 and 2026. Inventory 40,628 16,846 22,386 The increase compared to the same period last year is due to the Company’s procurement in line with increased sales and procurement of components identified as in short supply due to geopolitical tensions. See above for further details. Total current assets 173,527 116,421 154,265 Fixed assets 872 458 749 The increase compared to the same period last year results from the move to new offices and their adaptation to the Company’s needs. Right of use assets 3,187 559 514 The increase results from leasing new offices and signing a long-term lease agreement to support the Company’s business growth.
Page 13
13 Intangible assets 4,415 2,928 3,628 The increase results from capitalization of new developments of cameras and accessories during the period, net of ongoing amortization. Total non- current assets 8,474 3,945 4,891 Trade payables 10,078 6,085 5,842 The increase in trade payables results from an increase in production and component procurement activities. Current taxes payable - 640 - See explanation under current taxes receivable. Other accounts payable 14,191 12,920 15,024 The increase in payables results mainly from an increase in customer advances compared to the same period last year. Total current liabilities 24,269 19,645 20,866 Lease liabilities 3,540 197 111 The increase results from the move to new offices and the signing of a long-term lease agreement. Employee benefit liabilities, net 114 91 114 No material change. Deferred taxes 515 290 373 The change results from an increase in intangible assets due to timing differences. Total non- current liabilities 4,169 578 598 1.2. Results of the Company’s Business Activities Section For the six months ended June 30 For the three months ended June 30 For the year ended December 31, 2024 Explanations of Board of Directors to Changes 2025 2024 2025 2024 USD thousands Income from sales 73,243 55,278 37,080 28,055 114,934 The increase in revenue is due to a quantitative increase in the number of customers and units sold. Cost of sales )20,198 ( )15,933 ( )10,523 ( )7,917 ( )32,044 ( The improvement in gross margin compared to the same period last year results from production process and workforce efficiency, and cost reduction of parts and components due to increased order volumes by the Company. Gross profit 53,045 39,345 26,557 20,138 82,890 Research and development expenses )2,276 ( )1,199 ( )1,324 ( )480 ( )2,517 ( The increase compared to the same period last year results from enhanced development efforts and
Page 14
14 product improvements, primarily through staffing additions in R&D. The Company also completed several significant projects and launched new products. Accordingly, the Company ceased capitalizing R&D costs associated with these projects. Sales and marketing expenses )877 ( )901 ( )430 ( )418 ( )1,639 ( No material change. General and administrative expenses )4,682 ( )3,185 ( )1,795 ( )1,112 ( )5,730 ( The increase compared to the same period last year results from updated executive compensation agreements and an increase in share-based compensation. Operating profit 45,210 34,060 23,008 18,128 73,004 Financing expenses )152 ( )188 ( )120 ( )97 ( )430 ( No material change. Financing income 4,089 1,934 2,159 1,024 4,330 The increase in finance income compared to the same period last year results from higher bank deposit volumes. The Company also holds deposits in euro. Due to the devaluation of the dollar against the euro, the Company generated finance income. Profit before tax 49,147 35,806 25,047 19,055 76,904 Income tax )5,351 ( )5,383 ( )1,824 ( )3,178 ( )10,508 ( Due to significant appreciation of the shekel against the dollar, the Company incurred shekel- denominated finance expenses that reduced the tax liability in Q2 2025. Net profit 43,796 30,423 23,223 15,877 66,396 Loss from re- measurement of defined benefit plans - - - - )16 ( Total comprehensive income 43,796 30,423 23,223 15,877 66,380
Page 15
15 1.3. Cash Flows and Liquidity As of June 30, 2025, the Company had cash balances totaling approximately USD 42,580 thousand. Below are the main components of the Company’s cash flow: Section For the six months ended June 30 For the three months ended June 30 For the year ended December 31, 2023 Explanations of the Company’s Board of Directors to the Change2025 2024 2025 2024 USD thousands Operating activities 16,314 33,287 5,513 17,727 68,413 The decrease in operating activities results from significant inventory purchases and supplier advance payments made by the Company during the period to support business activities in 2025 and 2026, as well as the increase in the trade receivables item. Investing activities )19,723 ( )1,019 ( )5,780 ( )472 ( )50,096 ( The increase in investing activity results from deposits into short- term bank deposits. Financing activities )30,322 ( )11,569 ( 723 2,075 )11,739 ( The increase in financing activities results from the increase in dividend distributions in 2025 compared to the dividends distributed in 2024. Cash balance at end of period 42,580 89,138 42,580 89,138 74,708 1.4. Funding Sources As of the Report Date, the Company finances its operations through its equity and does not use external sources of financing. In light of the Company’s positive cash flow for years, the Company does not customarily take credit for the purpose of financing its ongoing operations, and accordingly, the Company does not have credit facilities. During the months of June and July 2021, the Company completed its initial public offering of shares on the stock exchange in consideration of approximately NIS 129 million (this amount also includes the allocation to the Company’s pricing underwriter within the framework of the offering). In addition, during the Report Period, 1,306,131 non-tradable options of Company employees were exercised, for aggregate consideration of approximately USD 3,074 thousand.
Page 16
16 1.5. Working Capital As of June 30, 2025, the Company has working capital in the amount of approximately USD 149,258 thousand, compared to working capital of approximately USD 96,776 thousand as of June 30, 2024. Part C – Disclosure Regarding the Corporation’s Financial Reporting and Corporate Governance Aspects 2. Information Regarding Material Events After the Report Date 2.1. On July 8, 2025, the Company’s Compensation Committee and Board of Directors approved the following matters: A. An update to the management fees of Mr. Chen Golan, the Chairman of the Company’s Board of Directors, whereby Mr. Chen Golan will be entitled to NIS 165 thousand (in place of NIS 144 thousand). B. An update to the management fees of Mr. Boris Kipnis, Director and Chief Technology Officer, whereby Mr. Boris Kipnis will be entitled to NIS 165 thousand (in place of NIS 144 thousand). C. An update to the salary of Mr. Michael Grosman, the Company’s CEO, whereby Mr. Michael Grosman will be entitled to NIS 225 thousand (in place of NIS 180 thousand). D. The grant of a bonus conditional upon targets to Chen Golan, Boris Kipnis, and Michael Grosman, whereby subject to meeting a threshold condition, namely, that the Company’s operating profit as reported in the Company’s consolidated financial statements as approved by the Company’s Board of Directors for the year in respect of which the bonus is granted, amounts to at least NIS 40 million (hereinafter: the “Threshold Condition”), and in addition to the fixed compensation and the bonus to which each of Chen Golan, Boris Kipnis, and Michael Grosman is entitled, each of them shall be entitled each year to an additional target-based bonus of up to six times their monthly cost, as applicable (such that in total, each of them may be entitled to a cash bonus of up to 18 times their monthly cost, as applicable), depending on the attainment of the Company’s sales target, according to the table detailed below (hereinafter: the “Target-Based Bonus”): Target Achievement Percentage Founders 100%+ Six salary supplements 90%-100% 90% of six salary supplements 80%-90% 80% of six salary supplements 70%-80% 70% of six salary supplements 70% No supplement
Page 17
17 Sales target means the sales target for the following year, which shall be determined by the Company’s Board of Directors by the date of approval of the periodic financial statements for the year that has ended. It is clarified that the aforementioned matters have not yet been approved by the General Meeting of the Company’s shareholders, which is scheduled to convene on August 14, 2025. For more information, see the Company’s Immediate Reports dated July 8, 2025, and the amended report from the same date (Reference Nos.: 2025-01- 050361 and 2025-01-050425, respectively), the contents of which are included in this Immediate Report by way of reference. 2.2. On July 21, 2025, the Company allocated 100,000 options to 4 employees of the Company, which may be exercised into 100,000 ordinary shares of the Company with a nominal value of NIS 0.00005 each. For further details regarding the terms of the options, see the Company’s Immediate Reports dated July 8, 2025, and July 21, 2025 (Reference Nos.: 2022-01-050368 and 2025-01-054055, respectively), the contents of which are included in this Report by way of reference. 3. Breakdown of Liabilities by Maturity Dates For data regarding the Company’s liability breakdown, see the Company’s Immediate Report dated August 11, 2025 (Reference No.: 2025-01-059211). Chen Golan Chairman of the Board of Directors Michael Grosman Chief Executive Officer Date of approval of the Report: August 10, 2025
Page 18
NextVision Stabilized Systems Ltd. Condensed Interim Financial Statements As of June 30, 2025 (Unaudited) This is an English translation of the information included in the approved financial statements. In the event of any discrepancy between the original Hebrew and the translation to English, the Hebrew version alone will prevail.
Page 19
1 NextVision Stabilized Systems Ltd. Condensed Interim Financial Statements As of June 30, 2025 (Unaudited) Table of Contents Page Review Report of the Independent Auditor 2 Condensed Statements of Financial Position 3 Condensed Statements of Comprehensive Income 4 Condensed Statements of Changes in Equity 5 Condensed Statements of Cash Flows 6 Notes to the Condensed Interim Financial Statements 7-13 - - - - - - - - - - - - - - - - -
Page 20
2 Review Report of the Independent Auditor to the Shareholders of NextVision Stabilized Systems Ltd. Introduction We have reviewed the accompanying financial information of NextVision Stabilized Systems Ltd. (hereinafter: the “Company”), which includes the condensed statement of financial position as of June 30, 2025, and the condensed statements of comprehensive income, changes in equity, and cash flows for the six-month and three-month periods then ended. The Board of Directors and Management are responsible for the preparation and presentation of this interim financial information in accordance with International Accounting Standard 34 (IAS 34) “Interim Financial Reporting,” and for preparing the interim financial information pursuant to Chapter D of the Israeli Securities Regulations (Periodic and Immediate Reports), 5730–1970. Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of Review We conducted our review in accordance with Review Standard (Israel) 2410 of the Institute of Certified Public Accountants in Israel – “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 (IAS 34). In addition to the aforementioned, based on our review, nothing has come to our attention that causes us to believe that the above-mentioned financial information does not comply, in all material respects, with the disclosure requirements of Chapter D of the Israeli Securities Regulations (Periodic and Immediate Reports), 5730–1970. Tel Aviv, Ziv Haft August 10, 2025 Certified Public Accountants
Page 21
NextVision Stabilized Systems Ltd. 3 Condensed Statements of Financial Position As of June 30 As of December 31, 20242025 2024 Unaudited Audited USD thousands Current assets Cash 42,580 89,138 74,708 Short term deposits 67,424 - 47,903 Trade receivables 17,560 8,508 6,374 Current taxes receivable 516 - 1,054 Other accounts receivable 4,819 1,929 1,840 Inventory 40,628 16,846 22,386 173,527 116,421 154,265 Non-current assets Fixed assets 872 458 749 Right of use assets 3,187 559 514 Intangible assets 4,415 2,928 3,628 8,474 3,945 4,891 182,001 120,366 159,156 Current liabilities Trade payables 10,078 6,085 5,842 Current taxes payable - 640 - Other accounts payable 14,191 12,920 15,024 24,269 19,645 20,866 Non-current liabilities Employee benefit liabilities, net 114 91 114 Deferred taxes 515 290 373 Lease liabilities 3,540 197 111 4,169 578 598 Equity Share capital and premium 47,112 43,184 43,194 Reserve for share-based payment 5,402 2,465 4,047 Retained earnings 101,049 54,494 90,451 Total equity 153,563 100,143 137,692 182,001 120,366 159,156 The accompanying notes constitute an integral part of these Condensed Interim Financial Statements. August 10, 2025 Approval Date of the Financial Statements Chen Golan Chairman of the Board Michael Grosman CEO Alex Lavie CFO
Page 22
NextVision Stabilized Systems Ltd. 4 Condensed Statements of Comprehensive Income For the six months ended June 30 For the three months ended June 30 For the year ended December 31, 2025 2024 2025 2024 2024 Unaudited Audited USD thousands (excl. share profit data) Income from sales 73,243 55,278 37,080 28,055 114,934 Cost of sales )20,198 ( )15,933 ( )10,523 ( )7,917 ( )32,044 ( Gross profit 53,045 39,345 26,557 20,138 82,890 Research and development expenses )2,276 ( )1,199 ( )1,324 ( )480 ( )2,517 ( Sales and marketing expenses )877 ( )901 ( )430 ( )418 ( )1,639 ( General and administrative expenses )4,682 ( )3,185 ( )1,795 ( )1,112 ( )5,730 ( )7,835 ( )5,285 ( )3,549 ( )2,010 ( )9,886 ( Profit from ordinary activity 45,210 34,060 23,008 18,128 73,004 Financing expenses )152 ( )188 ( )120 ( )97 ( )430 ( Financing income 4,089 1,934 2,159 1,024 4,330 Operating profit 49,147 35,806 25,047 19,055 76,904 Income taxes )5,351 ( )5,383 ( )1,824 ( )3,178 ( )10,508 ( Net profit 43,796 30,423 23,223 15,877 66,396 Other comprehensive profit (net of tax effects): Amounts that will not be subsequently reclassified to profit or loss: Loss from re-measurement for defined benefit plans - - - - )16 ( Total other comprehensive loss - - - - )16 ( Total comprehensive income 43,796 30,423 23,223 15,877 66,380 Net profit per share (in US dollars) Base net profit 0.5416 0.3837 0.2860 0.1999 0.8332 Diluted net profit 0.5218 0.3646 0.2752 0.1883 0.8024 The accompanying notes constitute an integral part of these Condensed Interim Financial Statements.
Page 23
NextVision Stabilized Systems Ltd. 5 Condensed Statements of Changes in Equity For the six-month period ended June 30, 2025 (unaudited) Share capital and premium Reserve for share-based payment Retained earnings Total equity USD thousands Balance as of January 1, 2025 43,194 4,047 90,451 137,692 Net profit - - 43,796 43,796 Consideration from exercise of options 3,918 (844) - 3,074 Cost of share-based payment - 2,199 - 2,199 Dividend - - (33,198) (33,198) Balance as of June 30, 2025 47,112 5,402 101,049 153,563 For the six-month period ended June 30, 2024 (unaudited) Share capital and premium Reserve for share-based payment Retained earnings Total equity USD thousands Balance as of January 1, 2024 40,303 1,774 37,857 79,934 Net profit - - 30,423 30,423 Consideration from exercise of options 2,881 (499) - 2,382 Cost of share-based payment - 1,190 - 1,190 Dividend - - (13,786) (13,786) Balance as of June 30, 2024 43,184 2,465 54,494 100,143 For the three-month period ended June 30, 2025 (unaudited) Share capital and premium Reserve for share-based payment Retained earnings Total equity USD thousands Balance as of April 1, 2025 46,083 4,385 77,826 128,294 Net profit - - 23,223 23,223 Consideration from exercise of options 1,029 (206) - 823 Cost of share-based payment - 1,223 - 1,223 Balance as of June 30, 2025 47,112 5,402 101,049 153,563
Page 24
NextVision Stabilized Systems Ltd. 6 Condensed Statements of Changes in Equity For the three-month period ended June 30, 2024 (unaudited) Share capital and premium Reserve for share-based payment Retained earnings Total equity USD thousands Balance as of April 1, 2024 40,634 2,175 38,617 81,426 Net profit - - 15,877 15,877 Consideration from exercise of options 2,550 )394( - 2,156 Cost of share-based payment - 684 - 684 Balance as of June 30, 2024 43,184 2,465 54,494 100,143 For the year ended December 31, 2024 (audited) Share capital and premium Reserve for share-based payment Retained earnings Total equity USD thousands Balance as of January 1, 2024 40,303 1,774 37,857 79,934 Net profit - - 66,396 66,396 Other comprehensive income - - )16( (16) Total comprehensive income - - 104,237 146,314 Dividend - - (13,786) (13,786) Consideration from exercise of options 2,891 )502( - 2,389 Cost of share-based payment - 2,775 - 2,775 Balance as of December 31, 2024 43,194 4,047 90,451 137,692 The accompanying notes constitute an integral part of these Condensed Interim Financial Statements.
Page 25
NextVision Stabilized Systems Ltd. 7 Condensed Statements of Cash Flows For the six month period ended June 30 For the three month period ended June 30 For the year ended December 31 2025 2024 2025 2024 2024 Unaudited Audited USD thousands Cash flows from operating activities Net profit 43,796 30,423 23,223 15,877 66,396 Adjustments required to present cash (used in) provided by operating activities: Adjustments to profit or loss items: Depreciation and amortization 1,152 567 683 272 1,142 Income taxes 5,351 5,383 1,824 3,178 10,508 Share-based payment cost 2,199 1,190 1,223 684 2,775 Change in employee benefit liabilities, net - - - - 7 Finance expenses (income), net )5,317( )1,683( )2,303( )934( )3,848( Changes in asset and liability items: Decrease (increase) in trade receivables )11,186( )1,035( )9,921( )1,750( 1,099 Increase in other accounts receivables )2,979( )933( )320( )685( )844( Increase in inventory )18,242( )916( )11,370( )2,078( )6,456( Increase in trade payables 4,236 1,537 2,980 98 1,294 Increase (decrease) in other payables )747( 2,665 1,896 4,458 4,704 Cash provided by operations activities 18,263 37,198 7,915 19,120 76,777 Interest received 2,859 1,875 968 1,018 4,176 Interest paid )137( )22( )68( )10( )40( Income taxes paid )4,671( )5,764( )3,302( )2,401( )12,500( Net cash provided by operating activities 16,314 33,287 5,513 17,727 68,413 Cash flows from investing activities Investment in fixed assets )210( )71( )107( )31( )432( Investment in short-term deposits )18,113( - )5,240( - )47,695( Capitalized development costs )1,400( )948( )433( )441( )1,969( Net cash provided by (used in) investing activities )19,723( )1,019( )5,780( )472( )50,096( Cash flows from financing activities Dividend )33,198( )13,786( - - )13,786( Exercise of share options into shares 3,074 2,382 823 2,156 2,389 Repayment of lease liabilites )198( )165( )100( )81( )342( Net cash provided by (used in) financing activities )30,322( )11,569( 723 2,075 )11,739( Increase (decrease) in cash )33,731( 20,699 456 19,330 6,578 Exchange rate differences on cash balances 1,603 )192( 1,148 )87( )501( Cash at the beginning of period 74,708 68,631 40,976 69,895 68,631 Cash at the end of period 42,580 89,138 42,580 89,138 74,708 The accompanying notes constitute an integral part of these Condensed Interim Financial Statements.
Page 26
NextVision Stabilized Systems Ltd. Notes to the Condensed Interim Financial Statements 8 Note 1: General A. The Company NextVision Stabilized Systems Ltd. (the “Company”) was incorporated in Israel in April 2009 and commenced its business activity in September 2009. The Company is an Israeli resident and its address is 9 HaDafna Street, Ra’anana. The Company is engaged in the development, manufacturing, and marketing of stabilized day and night cameras for ground and aerial vehicles, such as micro and mini UAVs and drones. In addition to the cameras, the Company develops auxiliary products that significantly reduce the integration time of the cameras into the various platforms of its customers. On June 14, 2021, the Company’s securities began trading on the Tel Aviv Stock Exchange Ltd., following the completion of its first public offering under a prospectus on June 10, 2021. B. Impact of the Iron Swords War On October 7, 2023, following a surprise attack by the terrorist organization Hamas from the Gaza Strip, the Government of Israel declared the Iron Swords War. Following the attack from the Gaza Strip, an attack also commenced on northern Israel by the terrorist organization Hezbollah from Lebanon, and tensions increased in additional areas. As part of its response to the threats of the Iron Swords War, the Government of Israel ordered the evacuation of dozens of communities located in the south of the country, around the Gaza Strip, and in the north, along the border with Lebanon, and also imposed restrictions on gatherings, the operation of workplaces, and educational activities in accordance with the instructions of the Home Front Command. In addition, many civilians were called up for reserve duty for extended periods. These factors led to a reduction and slowdown in business activity in Israel, resulting, inter alia, from the closure of businesses, manpower shortages, and disruptions in the supply chain. Potential fluctuations in commodity prices, foreign exchange rates, availability of materials, availability of manpower, local services, and access to local resources may affect entities whose main activity is with or in Israel. On September 27, 2024, the international credit rating agency Moody’s announced a two-notch downgrade of Israel’s credit rating from A2 to Baa1 with a negative outlook. This followed the agency’s earlier announcement on February 9, 2024, of a downgrade from A1 to A2, also with a continued negative outlook. A few days after Moody’s downgrade, the credit rating agency S&P also announced a one-notch downgrade of Israel’s credit rating from A+ to A and added a negative outlook, after it had already issued a previous downgrade during 2024. Additionally, on October 1, 2024, Moody’s announced a one-notch downgrade of the credit ratings of Israel’s five largest banks from A3 to Baa1 and added a negative outlook, following the downgrade of Israel. According to Moody’s, the downgrades and negative outlook reflect both the negative outlook on Israel’s credit rating and concerns regarding deterioration in the banks’ own condition in the event of further economic harm should the effects of the war worsen. On June 13, 2025, the State of Israel launched a military operation against Iran, called “Rising Lion”, with the objective of striking and destroying Iranian nuclear and weapons infrastructure. During 12 days of fighting, the IDF attacked strategic targets throughout Iran, destroying key facilities related to the Iranian nuclear program, ballistic missile arrays, and eliminating senior figures in Iran’s security establishment. In response to the operation, Iran launched hundreds of ballistic missiles and unmanned aerial vehicles at military and civilian targets in Israel. The attacks caused extensive infrastructure damage, significant property loss, approximately 30 fatalities among Israeli and foreign civilians, and injuries to hundreds more. On June 24, 2025, following an American strike on Iranian territory, a ceasefire agreement was reached between the parties. Upon the conclusion of the operation, a delay occurred in the activity of air freight companies, which was resolved approximately one week later.
Page 27
NextVision Stabilized Systems Ltd. Notes to the Condensed Interim Financial Statements 9 Note 1: General (cont.) Following the end of the operation and the resumption of air freight services, most of the goods that had not yet been shipped to the Company’s customers were released (during the last week of June and some also during July). Since the Company has several customers with payment terms, the goods shipped at the end of June were paid for during July. Since the outbreak of the war, there has been an increase in orders for the Company’s cameras and other products from its Israeli customers. In addition, last year, prior to the outbreak of the war, the Company increased its inventory in order to meet the growing demand for its products from customers. The Company also expanded its production capacity to meet the increased demand while continuing to supply customers’ orders on time. As of this date, the war has had no material impact on the Company’s results or its ability to deliver orders to customers on time. The Company continues to review, from time to time, the impact of the economic and wartime situation on its business operations. However, due to the uncertainty regarding the scope and duration of the war, the extent of reserve duty mobilization, the continued availability of adequate inventory, market volatility, potential additional actions by the Israeli government, and the impact of other factors, including on the business activities of the Company’s customers, the Company is currently unable to accurately assess the extent and nature of any further future impact of the war on its results. C. Tariffs on Goods Imported to the U.S. In April 2025, the U.S. administration announced a plan to impose tariffs on goods imported to the United States, which may also affect Israel’s economy. According to the macroeconomic forecast of the Bank of Israel’s Research Department from April 2025, the imposition of global tariffs will lead to a 4% decrease in global trade volume by the end of 2026 (compared to a scenario without tariffs). The plan includes two main components: a) A uniform tariff of 10% on all imports into the United States. b) Additional varying tariffs on imports from countries with a significant trade surplus with the U.S. As part of this plan, upon the start of its implementation, goods imported from Israel were subject to a 10% tariff under the uniform import tariff. As of August 7, 2025, imports from Israel to the United States are subject to a total tariff rate of 15% (10% uniform + 5% variable based on country). Additionally, under the tariff policy, there is an exemption for goods purchased by subcontractors on behalf of the U.S. government. Although part of the Company’s revenue is derived from exports to the U.S., the Company estimates that the potential impact of the new tariff policy on its business results is minimal. Note 2: Summary of Significant Accounting Policies Format of the Interim Financial Statements These financial statements have been prepared in condensed format as of June 30, 2025, and for the six-month and three-month periods ended on that date (hereinafter: the “Interim Financial Statements”). These statements should be read in conjunction with the Company’s annual financial statements as of December 31, 2024, and for the year then ended, including the accompanying notes (hereinafter: the “Annual Financial Statements”). The condensed interim financial statements comply with the provisions of International Accounting Standard 34, Interim Financial Reporting. Additionally, the condensed interim financial statements comply with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 5730–1970. The condensed interim financial statements were prepared using the same accounting policies and calculation methods applied in the Annual Financial Statements.
Page 28
NextVision Stabilized Systems Ltd. Notes to the Condensed Interim Financial Statements 10 Note 3: - Cash For the six-month period ended June 30 For the year ended December 31, 2024Composition: 2025 2024 Unaudited Audited USD thousand In banks 6,485 4,432 4,439 Deposits * 36,095 84,706 70,269 42,580 89,138 74,708 (*) Most of which are in dollar deposits for periods of three months including fixed interest ranging between 4.75%- 5.35%. Note 4: Deposits For the six-month period ended June 30 For the year ended December 31, 2024Composition 2025 2024 Unaudited Audited USD thousands Short term deposits* 67,424 - 47,903 67,424 - 47,903 (*) Most of which are in dollar deposits whose original term exceeds three months from the deposit date and do not exceed one year, including fixed annual interest ranging between 4.7%-5.3%. Note 5: Revenue from sales For the six-month period ended June 30 For the year ended December 31, 2024A. Composition: 2025 2024 Unaudited Audited USD thousands Sales in Israel 11,088 10,506 17,880 Sales in Europe 39,682 25,899 66,467 Sales in North America 18,601 9,459 17,975 Sales in other countries 3,872 9,414 12,612 73,243 55,278 114,934
Page 29
NextVision Stabilized Systems Ltd. Notes to the Condensed Interim Financial Statements 11 Note 5: Revenue from sales (cont.) B. Additional information on revenues For the six-month period ended June 30 For the year ended December 31, 20242025 2024 Unaudited Audited Revenue from main customers, each responsible for 10% or more of the total revenue reported in the financial statements: Customer A 15.9% 18.5% 15.9% Customer B 11.6% 9.2% 19.0% Customer C - 10.1% 4.9% Note 6: Significant Events During the Report Period A. On March 9, 2025, the Company’s Board of Directors approved the distribution of a dividend in the amount of approximately USD 33,198 thousand, to be paid during the month of March 2025. B. On March 9, 2025, the Company’s Compensation Committee and Board of Directors approved the grant of 273,000 options of the Company, exercisable into 273,000 ordinary shares with a nominal value of NIS 0.00005 each of the Company, to employees of the Company. The options are exercisable in three tranches: the first tranche, constituting 50% of the grant, is exercisable two years after the date of the grant; the second tranche, constituting 25% of the grant, is exercisable three years after the date of the grant; and the remaining 25% is exercisable in a single tranche four years after the date of the grant, subject to the continued existence of employer-employee relations. The exercise price of each option is NIS 84.15 (approximately USD 23.3). The fair value of the grant on the date of Board approval was approximately NIS 32.34 per option (approximately USD 8.95). The calculation was based on the following assumptions: standard deviation of 36.13%, risk-free interest rate of 4.01%, exercise period of five years, and the Company’s share closing price on the Tel Aviv Stock Exchange on March 6, 2025 – NIS 84.15. C. On March 9, 2025, the Compensation Committee and Board of Directors approved the grant of 65,000 non- marketable options to the Company’s CEO, 52,000 non-marketable options to the Chairman of the Board, and 52,000 non-marketable options to the Company’s CTO, who also serves as a Director. The options are exercisable into ordinary shares of the Company with a nominal value of NIS 0.00005 each. The options are exercisable in three equal annual tranches, subject to the continued existence of employer-employee relations between the Company and the CEO, and continued service of the Chairman and CTO at the Company. The grant was approved at the General Meeting held on April 29, 2025. D. During the period, employees of the Company exercised 1,306,131 options for shares of the Company, for total proceeds of approximately USD 3,074 thousand. E. Until December 31, 2024, the Company operated primarily from its offices located at 17 Tidhar Street, Ra’anana, with a total area of approximately 1,600 square meters and 17 parking spaces. As of January 1, 2025, the Company’s offices are located at 9 HaDafna Street, Ra’anana, with a total area of approximately 3,300 square meters, spread across two floors, and approximately 100 parking spaces. The lease agreement (hereinafter: the “ Lease Agreement”) is for a term of six years, through December 31, 2030. The Lease Agreement includes an option for the Company to extend the lease period by an additional 36 months, under terms detailed in the Lease Agreement.
Page 30
NextVision Stabilized Systems Ltd. Notes to the Condensed Interim Financial Statements 12 A lease asset and liability in the amount of USD 3,088 thousand was recognized by the Company, and the incremental borrowing rate was 8%. The option to extend was not taken into account in determining the lease term, as the Company does not reasonably expect the option to be exercised. Note 6: Significant Events During the Report Period (cont.) F. On April 29, 2025, the Company’s general meeting of shareholders approved a new compensation policy for the Company. Several changes were made in the new compensation policy compared to the previous policy, including, among others, the following provisions: 1. The cap on fixed compensation for the Chairman of the Board of Directors and the Company’s CTO was updated to NIS 2,200 thousand per year (instead of NIS 1,500 thousand per year), and for the CEO of the Company, it was updated to NIS 2,700 thousand per year (instead of NIS 1,500 thousand per year). The cap on fixed compensation for officers subordinate to the CEO was updated to NIS 1,500 thousand per year (instead of NIS 700 thousand per year). 2. The cap on the Company’s variable compensation was changed to 18 times the monthly salary (instead of 12 monthly salaries), based on employer cost. In addition, a threshold condition was added stipulating that officers of the Company will be eligible for variable compensation only if the Company’s operating profit, as stated in its financial statements as approved by the Board of Directors, amounts to at least NIS 40 million. Each of the Chairman of the Board and the CTO shall be entitled to a cash bonus of 2.5% of the Company’s pre-tax net profit, up to a ceiling of 12 times each of their respective monthly costs. Additionally, they shall be entitled to an additional cash bonus of up to 6 times their respective monthly costs, contingent upon achieving targets as specified in the compensation policy. 3. The cap on variable compensation that may be granted to an officer subordinate to the CEO shall be up to 6 times the monthly salary cost. In addition, the cap on the value of equity compensation was amended such that for the Chairman of the Board and the Company’s CTO, the fair value shall not exceed 10 times their respective monthly fixed compensation during a calendar year, and for the CEO, the fair value shall not exceed 5.5 times the CEO’s monthly fixed compensation during a calendar year. G. On May 18, 2025, the Company’s Board of Directors approved the grant of 52,000 options of the Company to Company employees who are not officers, and 31,000 options to officers, with all options exercisable into a total of 83,000 ordinary shares of the Company with a nominal value of NIS 0.00005 each. The options are exercisable in three tranches: the first tranche, constituting 50% of the grant, is exercisable two years after the date of grant; the second tranche, constituting 25% of the grant, is exercisable three years after the date of grant; and the remaining 25% is exercisable in a single tranche four years after the date of grant, subject to the continued existence of employer-employee relations. The exercise price of each option granted to officers and employees of the Company is NIS 93.69 (approximately USD 26.46). The fair value of the grant on the date of Board approval was approximately NIS 37.14 per option (approximately USD 10.49). The calculation was based on the following assumptions: standard deviation of 37.9%, risk-free interest rate of 3.97%, exercise period of five years, and the Company’s share closing price on the Tel Aviv Stock Exchange on May 15, 2025 – NIS 93.69.
Page 31
NextVision Stabilized Systems Ltd. Notes to the Condensed Interim Financial Statements 13 Note 7: Events After the Balance Sheet Date A. On July 8, 2025, the Compensation Committee and the Board of Directors approved the following: An update to the Company’s engagement with the Chairman of the Board of Directors, the CEO, and the CTO (hereinafter: the “Officers”) under new management and employment agreements, as well as the revised compensation structure, as detailed below: 1. The Chairman of the Board and the CTO – from a monthly employer cost of NIS 144 thousand each to a monthly employer cost of NIS 165 thousand. 2. The CEO – from a monthly employer cost of NIS 180 thousand to a monthly employer cost of NIS 225 thousand. 3. The addition of variable compensation conditional upon performance targets for the Chairman of the Board, the CTO, and the CEO in an amount of up to six monthly salaries, subject to meeting the Company’s sales target. The updated engagement shall be implemented subject to approval by the General Meeting of Shareholders, which is scheduled to convene on August 14, 2025. B. On July 8, 2025, the Company’s Board of Directors approved the grant of 100,000 Company options to employees who are not officers. The options are exercisable into ordinary shares of the Company with a nominal value of NIS 0.00005 each. The options are exercisable in three tranches: the first tranche, constituting 50% of the grant, is exercisable two years after the date of grant; the second tranche, constituting 25% of the grant, is exercisable three years after the date of grant; and the remaining 25% is exercisable in a single tranche four years after the date of grant, subject to the continued existence of employer-employee relations. The exercise price of each option granted to the Company’s employees is NIS 126.4 (approximately USD 37.93). The fair value of the grant on the date of Board approval was approximately NIS 50.17 per option (approximately USD 15.05). The calculation was based on the following assumptions: standard deviation of 38.29%, risk-free interest rate of 3.84%, exercise period of five years, and the Company’s share closing price on the Tel Aviv Stock Exchange on July 8, 2025 – NIS 126.4.
Page 32
NextVision Stabilized Systems Ltd. Quarterly Report As of June 2025 Quarterly Report Regarding the Effectiveness of Internal Control over Financial Reporting and Disclosure pursuant to Article 38C(a)
Page 33
Quarterly Report Regarding the Effectiveness of Internal Control over Financial Reporting and Disclosure pursuant to Article 38C(a) As of June 30, 2025 Management, under the supervision of the Board of Directors of NextVision Stabilized Systems Ltd. (hereinafter: the “Company”), is responsible for the establishment and maintenance of adequate internal control over financial reporting and disclosure in the Company. In this context, the members of Management are: 1. Michael Grosman, Chief Executive Officer; 2. Alex Lavie, Chief Financial Officer; Internal control over financial reporting and disclosure includes controls and procedures existing in the Company, which were designed by the Chief Executive Officer and the most senior officer in the finance function or under their supervision, or by those actually performing said functions, under the supervision of the Company’s Board of Directors. These controls and procedures are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with legal requirements, and to ensure that information the Company is required to disclose in its reports pursuant to legal provisions is collected, processed, summarized, and reported in a timely manner and in the format prescribed by law. Internal control includes, inter alia, controls and procedures designed to ensure that the information the Company is required to disclose as stated above is accumulated and conveyed to the Company’s Management, including the Chief Executive Officer and the most senior officer in the finance function or those actually performing said functions, in order to allow for timely decision-making with respect to the disclosure requirement. Due to its inherent limitations, internal control over financial reporting and disclosure is not intended to provide absolute assurance that misstatements or omissions in the reports will be prevented or detected. Management, under the supervision of the Board of Directors, conducted a review and evaluation of the internal control over financial reporting and disclosure in the Company and its effectiveness. The evaluation of the effectiveness of internal control over financial reporting and disclosure conducted by Management under the supervision of the Board of Directors included: an assessment of reporting and disclosure risks, process mapping and identification of material processes for financial reporting and disclosure, examination and documentation of the existing controls in the Company, and an overall evaluation of the effectiveness of internal control, including entity-level controls (ELC), the financial reporting process, and general IT controls (ITGC) of the Company’s information systems. The material processes for financial reporting include controls over the sales process and inventory process. As of the date of the report, no event or matter has been brought to the attention of the Board of Directors and Management that could change the assessment of the effectiveness of internal control as found in the most recent internal control report. Based on the evaluation of effectiveness conducted by Management under the supervision of the Board of Directors as detailed above, the Board of Directors and Management of the Company have concluded that the internal control over financial reporting and disclosure in the Company as of June 30, 2025 is effective.
Page 34
(a) Statement of the Chief Executive Officer pursuant to Article 38C(d)(1) Officers’ Statement Statement of the Chief Executive Officer I, Michael Grosman, declare that: 1. I have reviewed the Quarterly Report of NextVision Stabilized Systems Ltd. (hereinafter: the “Company”) for the second quarter of 2025 (hereinafter: the “Reports”); 2. To the best of my knowledge, the Reports do not contain any untrue statement of a material fact or omit a material fact required such that, in light of the circumstances under which such statements were made, the statements included therein would not be misleading with respect to the Report Period; 3. To the best of my knowledge, the financial statements and other financial information included in the Reports fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of the dates and for the periods to which the Reports relate; 4. I have disclosed to the Company’s independent auditor, the Board of Directors, and the Audit Committee and Financial Statements Committee of the Company, based on my most recent evaluation of internal control over financial reporting and disclosure: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting and disclosure which are reasonably likely to adversely affect the Company’s ability to record, process, summarize, or report financial information in a manner that would raise doubt as to the reliability of the financial reporting and the preparation of the financial statements in accordance with legal requirements; and (b) Any fraud, whether material or not, involving the Chief Executive Officer or any person directly subordinate to him, or any other employees with a significant role in internal control over financial reporting and disclosure; 5. I, alone or together with others in the Company: (a) Established controls and procedures, or ensured the establishment and maintenance of controls and procedures under my supervision, designed to ensure that material information relating to the Company is made known to me by others within the Company, particularly during the period in which the Reports were being prepared; and (b) Established controls and procedures, or ensured the establishment and maintenance of controls and procedures under my supervision, designed to reasonably ensure the reliability of financial reporting and the preparation of the financial statements in accordance with legal requirements, including generally accepted accounting principles. (c) No event or matter has been brought to my attention that occurred during the period between the last quarterly report date and this Report date that would change the conclusions of the Board of Directors and Management regarding the effectiveness of the internal control over the Company’s financial reporting and disclosure. Nothing in the above shall derogate from my responsibility or the responsibility of any other person under any law. Date Michael Grosman CEO
Page 35
(b) Statement of the Most Senior Officer in the Finance Function pursuant to Article 38C(d)(2) Officers’ Statement Statement of the Most Senior Officer in the Finance Function I, Alex Lavie, declare that: 1. I have reviewed the interim financial statements and other financial information included in the interim reports of NextVision Stabilized Systems Ltd. (hereinafter: the “Company”) for the second quarter of 2025 (hereinafter: the “Reports” or “Interim Reports”); 2. To the best of my knowledge, the interim financial statements and other financial information included in the Interim Reports do not contain any untrue statement of a material fact or omit a material fact required such that, in light of the circumstances under which such statements were made, the statements included therein would not be misleading with respect to the Report Period; 3. To the best of my knowledge, the interim financial statements and other financial information included in the Interim Reports fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of the dates and for the periods to which the Reports relate; 4. I have disclosed to the Company’s independent auditor, the Board of Directors, and the Audit Committee and Financial Statements Committee of the Company, based on my most recent evaluation of internal control over financial reporting and disclosure: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting and disclosure, to the extent it relates to the interim financial statements and other financial information included in the Interim Reports, which are reasonably likely to adversely affect the Company’s ability to record, process, summarize, or report financial information in a manner that would raise doubt as to the reliability of the financial reporting and the preparation of the financial statements in accordance with legal requirements; and (b) Any fraud, whether material or not, involving the Chief Executive Officer or any person directly subordinate to him, or any other employees with a significant role in internal control over financial reporting and disclosure; 5. I, alone or together with others in the Company: (a) Established controls and procedures, or ensured the establishment and maintenance of controls and procedures under my supervision, designed to ensure that material information relating to the Company, is made known to me by others within the Company, particularly during the period in which the Reports were being prepared; and (b) Established controls and procedures, or ensured the establishment and maintenance of controls and procedures under our supervision, designed to reasonably ensure the reliability of financial reporting and the preparation of the financial statements in accordance with legal requirements, including generally accepted accounting principles; (c) No event or matter has been brought to my attention that occurred during the period between the last quarterly report date and this Report date, regarding the interim financial statements and any other financial information included in the Interim Reports, which, in my opinion, would change the conclusions of the Board of Directors and Management regarding the effectiveness of the internal control over the Company’s financial reporting and disclosure. Nothing in the above shall derogate from my responsibility or the responsibility of any other person under any law. Date Alex Lavie CFO