What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-31 compared with 2020-03-16 · 358 added, 141 removed, 184 unchanged (73% of the section changed)

market for registrant’s common equity, related stockholder matters and issuer purchases

Common Stock is quoted on the OTC Pink under the symbol “SCTC”.

There is currently no trading market for our Common

Stock and there is no assurance that a regular trading market will ever develop.

of December 31, 2019, there were 90 stockholders of record of our Common Stock and 26,884,921 shares of our Common Stock outstanding.

Common Stock is quoted on the OTCQB Market under the symbol “SCTC”.

Trading in stocks quoted on the OTCQB is often

thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s

operations or business prospects.

We cannot assure you that there will be a market in the future for our common stock.

securities are not listed or traded on the floor of an organized national or regional stock exchange.

Instead, OTCQB securities

transactions are conducted through a telephone and computer network connecting dealers in stocks.

OTCQB issuers are traditionally

smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

of December 31, 2020, there were 44 stockholders of record of our Common Stock and 36,756,983 shares of our Common

Stock outstanding.

have never declared or paid any cash dividends on our Common Stock.

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Compensation Plan Information

of December 31, 2019, we did not have any equity compensation plans.

Share Incentive Plan

have adopted the 2020 Plan under which we may grant equity-based incentive awards to attract, motivate and retain the talent for

which we compete.

The maximum number of ordinary shares available for issuance under the 2020 Plan is equal to the sum of 9,422,440

shares, or such number as our board of directors may determine from time to time.

Administration.

Our board of directors, or a duly authorized committee of our board of directors, will administer the 2020 Plan.

2020 Plan, the administrator has the authority, subject to applicable law, to interpret the terms of the 2020 Plan and any award

agreements or awards granted thereunder, designate recipients of awards, determine and amend the terms of awards, including the

exercise price of an option award, the fair market value of an ordinary share, the time and vesting schedule applicable to an

award or the method of payment for an award, accelerate or amend the vesting schedule applicable to an award, prescribe the forms

of agreement for use under the 2020 Plan and take all other actions and make all other determinations necessary for the administration

of the 2020 Plan.

administrator also has the authority to amend and rescind rules and regulations relating to the 2020 Plan or terminate the 2020

Plan at any time before the date of expiration of its ten year term.

The 2020 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section

102 of the Israeli Income Tax Ordinance (New Version), 5721-1961 (the “Ordinance”), and Section 3(i) of the Ordinance

and for awards granted to our United States employees or service providers, including those who are deemed to be residents of

the United States for tax purposes, Section 422 of the Code and Section 409A of the Code.

102 of the Ordinance allows employees, directors and officers who are not controlling shareholders and are considered Israeli

residents to receive favorable tax treatment for compensation in the form of shares or options.

Our non-employee service providers

and controlling shareholders may only be granted options under section 3(i) of the Ordinance, which does not provide for similar

tax benefits.

All awards granted pursuant to the 2020 Plan will be evidenced by an award agreement, in a form approved, from time to time,

by the administrator in its sole discretion.

The award agreement will set forth the terms and conditions of the award, including

the type of award, number of shares subject to such award, vesting schedule and conditions (including performance goals or measures)

and the exercise price, if applicable.

Certain awards under the 2020 Plan may constitute or provide for a deferral of compensation,

subject to Section 409A of the Code, which may impose additional requirements on the terms and conditions of such awards.

award will expire seven years from the date of the grant thereof, unless such shorter term of expiration is otherwise designated

by the administrator.

The 2020 Plan provides 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.

granted under the 2020 Plan to our employees who are U.S.

residents may qualify as “incentive stock options”

the meaning of Section 422 of the Code, or may be non-qualified stock options.

The exercise price of a stock option may not be

less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain

significant stockholders).

An award under the 2020 Plan may be exercised by providing the company with a written or electronic notice of exercise and

full payment of the exercise price for such shares underlying the award, if applicable, in such form and method as may be determined

by the administrator and permitted by applicable law.

An award may not be exercised for a fraction of a share.

With regard to

tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2020 Plan, the administrator

may, in its discretion, accept cash, provide for net withholding of shares in a cashless exercise mechanism or direct a securities

broker to sell shares and deliver all or a part of the proceeds to the Company or the trustee.

Transferability.

Other than by will, the laws of descent and distribution or as otherwise provided under the 2020 Plan, neither the options

nor any right in connection with such options are assignable or transferable.

of Employment.

In the event of termination of a grantee’s employment or service with the company or any of its affiliates,

all vested and exercisable awards held by such grantee as of the date of termination may be exercised within three months after

such date of termination, unless otherwise determined by the administrator.

After such three month period, all such unexercised

awards will terminate and the shares covered by such awards shall again be available for issuance under the 2020 Plan.

the event of termination of a grantee’s employment or service with the company or any of its affiliates due to such grantee’s

death, permanent disability or retirement, all vested and exercisable awards held by such grantee as of the date of termination

may be exercised by the grantee or the grantee’s legal guardian, estate, or by a person who acquired the right to exercise

the award by bequest or inheritance, as applicable, within twelve months after such date of termination, unless otherwise provided

by the administrator.

Any awards which are unvested as of the date of such termination or which are vested but not then exercised

within the twelve month period following such date, will terminate and the shares covered by such awards shall again be available

for issuance under the 2020 Plan.

Notwithstanding

any of the foregoing, if a grantee’s employment or services with the company or any of its affiliates is terminated for

“cause”

(as defined in the 2020 Plan), all outstanding awards held by such grantee (whether vested or unvested) will

terminate on the date of such termination and the shares covered by such awards shall again be available for issuance under the

Transactions.

In the event of a share split, reverse share split, share dividend, recapitalization, combination or reclassification of our

shares, or any other increase or decrease in the number of issued shares effected without receipt of consideration by the company

(but not including the conversion of any convertible securities of the company), the administrator in its sole discretion shall

make an appropriate adjustment in the number of shares related to each outstanding award and to the number of shares reserved

for issuance under the 2020 Plan, to the class and kind of shares subject to the 2020 Plan, as well as the exercise price per

share of each outstanding award, as applicable, the terms and conditions concerning vesting and exercisability and the term and

duration of outstanding awards, or any other terms that the administrator adjusts in its discretion, or the type or class of security,

asset or right underlying the award (which need not be only that of the Company, and may be that of the surviving corporation

or any affiliate thereof or such other entity party to any of the above transactions);

provided that any fractional shares resulting

from such adjustment shall be rounded down to the nearest whole share unless otherwise determined by the administrator.

event of a distribution of a cash dividend to all shareholders, the administrator may determine, without the consent of any holder

of an award, that the exercise price of an outstanding and unexercised award shall be reduced by an amount equal to the per share

gross dividend amount distributed by the Company, subject to applicable law.

the event of a merger or consolidation of our company, or a sale of all, or substantially all, of the Company’s shares or

assets or other transaction having a similar effect on the Company, or change in the composition of the board of directors, or

liquidation or dissolution, or such other transaction or circumstances that the board of directors determines to be a relevant

transaction, then without the consent of the grantee, the administrator may but is not required to (i) cause any outstanding award

to be assumed or substituted by such successor corporation, or (ii) regardless of whether or not the successor corporation assumes

or substitutes the award (a) provide the grantee with the option to exercise the award as to all or part of the shares, and may

provide for an acceleration of vesting of unvested awards, or (b) cancel the award and pay in cash, shares of the company, the

acquirer or other corporation which is a party to such transaction or other property as determined by the administrator as fair

in the circumstances.

Notwithstanding the foregoing, the administrator may upon such event amend, modify or terminate the terms

of any award as it shall deem, in good faith, appropriate.

Sales of Unregistered Securities

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(the “Closing Date”).

We plan to integrate and fully adopt ScoutCam Ltd.’s business into our Company as our primary business activity.

31, 2019, we changed our name to ScoutCam Inc.

Following this transaction, we integrated and fully adopted ScoutCam Ltd.’s business into our Company as our primary business

On December 31, 2019, we changed our name to ScoutCam Inc.

ScoutCam Ltd., we are engaged in the development, production and marketing of innovative miniaturized imaging equipment, or our

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further expand the activity in these non-medical spaces.

The financial statements

of the Company have been prepared assuming it will continue as a going concern.

As discussed in the notes to the financial statements,

the Company has incurred operating losses.

These factors, among others, raise substantial doubt about its ability to continue

as a going concern within one year after the date our accompanying consolidated financial statements are issued.

Additionally,

our independent registered public accounting firm included an explanatory paragraph in its report for the years ended December

31, 2019, regarding concerns about Company’s ability to continue as a going concern within one year after the date our

accompanying consolidated financial statements are issued.

financial statements of the Company have been prepared assuming it will continue as a going concern.

As discussed in the notes

to the financial statements, the Company has incurred operating losses.

These factors, among others, raise substantial doubt about

its ability to continue as a going concern within one year after the date our accompanying consolidated financial statements are

Additionally, our independent registered public accounting firm included an explanatory paragraph in its report for the

years ended December 31, 2020, regarding concerns about Company’s ability to continue as a going concern within one year

after the date our accompanying consolidated financial statements are issued.

of COVID-19 Pandemic

COVID-19 pandemic has had a significant impact on global markets and the global economy, including countries in which the Company

As the extent of the impact on the global economy remains unclear, the Company anticipates that it will have a continuing

impact on global economies in the near and long-term future.

In light of the below mentioned factors, the COVID-19 pandemic had

and most likely will continue to have a material effect on the Company’s operations, and the extent to which the COVID-19

pandemic will impact the Company’s operations will depend on future developments.

In particular, the continued spread of

COVID-19 globally had and most likely will continue to have material adverse impact on the Company’s operations and workforce,

including its manufacturing activities, product sales, as well as its ability to continue to raise capital.

Travel restrictions

had and most likely will continue to have a material adverse impact on our sales and marketing and research and development efforts.

Accounting Policies and Estimates

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of the Securities and Exchange Commission.

The accompanying comparative

consolidated financial statements include the historical accounts of ScoutCam as a “Carve-out Business”, a division

Throughout the comparative periods included in these Financial Statements, the Carve-out Business operated as part

accompanying comparative consolidated financial statements include the historical accounts of ScoutCam as a “Carve-out Business”,

a division of Medigus.

Throughout the comparative periods included in these Financial Statements, the Carve-out Business operated

as part of Medigus.

Separate financial statements have not historically been prepared for the Carve-out Business.

These carve-out comparative

financial statements have been prepared on a standalone basis and are derived from Medigus’s consolidated financial statements

and accounting records.

The carve-out comparative financial statements reflect ScoutCam’s financial position, results of

operations, changes in net parent deficit and cash flows in accordance with U.S.

The financial position,

results of operations, changes in net parent deficit, and cash flows of the Carve-out Business may not be indicative of its results

had it been a separate stand-alone entity during the comparative periods presented.

The comparative carve-out

financial statements of the Company include expenses which were allocated from Medigus for certain functions, including general

corporate expenses related to corporate strategy, procurement, Information Technology (“IT”), Human Resources (“HR”)

These allocation have been made on the basis of direct usage when identifiable, with the remainder allocated on the

basis of headcount.

carve-out comparative financial statements have been prepared on a standalone basis and are derived from Medigus’s consolidated

financial statements and accounting records.

The carve-out comparative financial statements reflect ScoutCam’s financial

position, results of operations, changes in net parent deficit and cash flows in accordance with U.S.

financial position, results of operations, changes in net parent deficit, and cash flows of the Carve-out Business may not be

indicative of its results had it been a separate stand-alone entity during the comparative periods presented.

comparative carve-out financial statements of the Company include expenses which were allocated from Medigus for certain functions,

including general corporate expenses related to corporate strategy, procurement, Information Technology (IT), Human Resources

(HR) and legal.

These allocation have been made on the basis of direct usage when identifiable, with the remainder allocated on

the basis of headcount.

Management believes the expense allocation methodology and results are reasonable and consistently applied

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Revenues are presented net of VAT.

to December 31, 2017, revenues were measured in accordance with ASC 605, “Revenue recognition”.

The implementation

of ASC 606 did not have a material effect on the financial statements of ScoutCam as ScoutCam’s accounting for revenue recognition

remains substantially identical.

Company recognizes revenue when a customer obtains control over promised goods or services.

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at a point in time.

obligations are satisfied over time if one of the following criteria is met:(a) the customer simultaneously receives and consumes

obligations are satisfied over time if one of the following criteria is met:

(a) the customer simultaneously receives and consumes

the benefits provided by ScoutCam’s performance;

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from product sales are recognized when the customer obtains control of Company’s product, typically upon shipment to the

Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from

Company also generates revenues from development services.

Revenue from development services is recognized over the period of

the applicable service contract.

There are no long-term payment terms or significant financing components of ScoutCam’s

Company’s contract payment terms for product and services vary by customer.

ScoutCam assesses collectibility based on several

factors, including collection history.

receivable are presented in balance sheet net of allowance for doubtful accounts.

ScoutCam estimates the collectibility of its

accounts receivable balances and adjusts its allowance for doubtful accounts accordingly.

revenue recognition criteria are not met for a sale transaction that has been billed, the Company does not recognize deferred

revenues or the related account receivable.

include raw materials, inventory in process and finished products and are valued at the lower of cost or net realizable value.

cost is determined on the basis of “first in-first out”

Cost of purchased raw materials and inventory in process

includes costs of design, raw materials, direct labor, other direct costs and fixed production overheads.

Materials and other

supplies held for use in the production of inventories are not written down below cost if the finished products in which they

will be incorporated are expected to be sold at or above cost.

Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following:

forecasted sales or usage, estimated current and future market values.

Company adopted the new accounting standard Accounting Standards Codification 842 “Leases,”

and all the related amendments,

on January 1, 2019 and used the standard’s effective date as the Company’s date of initial application.

Consequently,

financial information was not updated and the disclosures required under the new standard are not provided for dates and periods

before January 1, 2019.

The new standard also provides practical expedients for an entity’s ongoing accounting.

of this standard did not have a material effect on the Company’s financial statements.

On January 1, 2019, the Company recognized

ROU assets of approximately USD 19 thousand and lease liabilities of approximately USD 19 thousand for its operating leases of

real estate and vehicles.

The Company has elected the short-term lease exception for leases with a term of 12 months or less.

As part of this election it will not recognize right-of-use assets and lease liabilities on the balance sheet for leases with

terms less than 12 months.

Company’s leases relate to buildings for the Company’s activities and vehicles leases.

Sales taxes collected from customers relating to product sales and remitted to governmental authorities are excluded

from revenues.

The Company also

generates revenues from development services.

Revenue from development services is recognized over the period of the applicable

service contract.

To the extent development services are not distinct from the performance obligation relating to the subsequent

mass production phase of the prototype under development, revenue from these services is deferred until commencement of the production

phase of the project.

long-term payment terms or significant financing components of the Company’s contracts.

The Company’s

contract payment terms for product and services vary by customer.

The Company assesses collectibility based on several factors,

including collection history.

Accounts receivable

are presented in the Company’s consolidated balance sheets net of allowance for doubtful accounts.

The Company estimates

the collectibility of its accounts receivable balances and adjusts its allowance for doubtful accounts accordingly.

recognition criteria are not met for a sale transaction that has been billed, the Company does not recognize deferred revenues

or the related account receivable.

of the Year Ended December 31, 2020 and the Year Ended December 31, 2019

Company’s primary business activity during 2020 was the completion of R&D and the transition to the production stage

with respect to a contract with a Fortune 500 Multinational Healthcare Corporation, while expanding the R&D team to enable

additional projects in parallel.

The main effect of this activity was the increase in the number of employees from 19 at the end

of 2019 to 27 at the end of 2020 to enable the Company to manage the anticipated increased workload.

major activities in 2020 were the following:

marketing activities, including the recruitment of a Director of Business Development in the US, and launching a multi-platform

digital marketing campaign.

activity around the Company’s IP, including submissions of new patent applications as well as maintenance, defense,

and commercialization efforts of existing patents.

December 30, 2019, upon the completion of the Exchange Agreement (as defined herein), the Company transitioned from

a shell company to an operating company.

This turn led to, among other, an increase in professional services (legal

counsels, accountants, SOX consultants, etc.), fees and related costs in connection with ScoutCam Inc.’s post-Closing

Date Board of Directors, increases in D&O insurance, etc.

in the operation expenses in order to improve the current Company’s R&D capabilities.

in capital expenses to provide the necessary facilities, IT, and lab tools for the newly recruited employees and to upgrade

the Company’s production and quality control capabilities.

following table summarizes our results of operations for the years ended December 31, 2020 and 2019, together with the changes

in those items in dollars and as a percentage:

and development expenses

and marketing expense

and administrative expenses

the year ended December 31, 2020, we generated revenues of $491,000, an increase of $182,000 or 59%, from 2019 revenues.

increase in revenues was primarily due to the sale of products to A.M.

Surgical (see Item 1).

Total revenues recorded from A.M.

Surgical during 2020 amounted to approximately $383,000.

Total revenues we recorded from A.M.

Surgical during 2019 amounted

to approximately $85,000.

This increase was partially offset by decrease in revenues to other customers due to:

COVID-19 pandemic impact on global markets and the global economy, including countries and industries in which the Company

of the revenues for year ended December 31, 2019 were derived from sales of miniature camera and related equipment to occasional

The Company’s management has decided to reduce sales to occasional customers and focus on larger projects.

Our current business model is that of a B2B approach, in which we seek to identify target businesses interested in integrating

our micro ScoutCam™

technology, or commissioning individual projects using our technology.

Performance Obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue

and amounts that will be invoiced and recognized as revenue in future periods.

As of December 31, 2020, the total RPO amounted to $2.9

million, which we expect to recognize over the expected manufacturing term

of the product under development.

of revenues for the year ended December 31, 2020 were $994,000, an increase of $452,000, or 83%, compared

to cost of revenues of $542,000 for the year ended December 31, 2019.

increase in cost of revenues was due to:

in revenues as described above;

in products and services mix;

increase in payroll expenses as a result of hiring

additional employees.

loss for the year ended December 31, 2020 was $503,000, an increase of $270,000 compared to a gross loss of $233,000

for the year ended December 31, 2019.

Gross loss is impacted by several factors, including shifts in product mix, sales

volume, fluctuations in manufacturing costs, labor costs, and pricing strategies.

and Development Expenses

and development expenses for the year ended December 31, 2020, were $725,000, an increase of $451,000, or 165%, compared to $274,000

for the year ended December 31, 2019.

The increase was primarily due to a $231,000 increase in payroll expenses and a $205,000

increase in materials and subcontractors.

The increase in payroll expenses resulted from an increase in share - based compensation

expenses (see note 9 to our financial statements for the year ended December 31, 2020) and hiring additional employees.

increase in materials and subcontractors was primarily due to an increase in research and development activities as described under “Overview”.

and Marketing Expenses

and marketing expenses for the year ended December 31, 2020, were $443,000, an increase of $260,000, or 142%, compared to $183,000

for the year ended December 31, 2019.

The increase was primarily due to an increase in marketing activities as described under

“Overview”.

and Administrative Expenses

and Administrative expenses for the year ended December 31, 2020, were $3,035,000, an increase of $1,918,000, or 172%, compared to $1,117,000

for the year ended December 31, 2019.

The increase was primarily due to a $767,000 increase in payroll expenses, as a result of

an increase in share - based compensation expenses (see note 9 to our financial statements for the year ended December 31, 2020)

and hiring additional employees and a $826,000 increase in professional services.

The increase in professional services was primarily

due to an increase in share - based compensation expenses, as result from the incorporation of the Subsidiary as an independent

company and in connection with the execution of that certain securities exchange agreement involving the Subsidiary and increase

in patent expenses as described under “Overview”.

incurred an operating loss of $4,706,000 for the year ended December 31, 2020, an increase of $2,899,000, or 160%,

compared to operating loss of $1,807,000 for the year ended December 31, 2019.

The increase in operating results was due to

an increase of $270,000 in gross loss, an increase of $451,000 in research and development expenses, an increase of $260,000

in sales and marketing expenses and increase of $1,918,000 in administrative and general expenses.

and Capital Resources

2020, we generated liquidity primarily from fund raising and warrant exercises as described at note 9 to our financial

statements for the year ended December 31, 2020.

2020, we received proceeds from fund raising in the aggregate approximate amount of $2.9 million, net of issuance expenses and

$1.7 million from warrants exercise.

of December 31, 2020, our total assets were $5,895,000.

As of December 31, 2019, our total assets were $4,757,000.

increase of assets was mainly due to an increase of contract fulfillment assets, increase of property and equipment and

increase of other current assets.

As of December 31, 2020, our total liabilities were $1,931,000.

As of December 31, 2019,

our total liabilities were $2,235,000.

The decrease of liabilities was mainly due to a decrease of loan from Parent Company,

decrease of other current expenses, partially offset by increase of contract liabilities and other accrued compensation

the year ended December 31, 2020, we incurred losses of $4,667,000 and negative cash flow from operating activities of

approximately $4,187,000.

Based on the projected cash flows, our management is of the opinion that without further fundraising

it will not have sufficient resources to enable it to continue its operating activities, including the development, manufacturing

and marketing of its products for a period of at least 12 months from the financial statements issuance date.

As a result, there

is substantial doubt about our ability to continue as a going concern.

Management’s

plans include continuing commercialization of our products and securing sufficient financing through the sale of additional equity

securities, debt or capital inflows from strategic partnerships and others.

There are no assurances, however, that we will be

successful in obtaining the level of financing needed for its operations.

If we are unsuccessful in commercializing its products

and securing sufficient financing, it may need to reduce activities, curtail or even cease operations.

following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):

Cash used in Operating Activity

Cash used in Investing Activity

Cash provided by Financing Activity

the fiscal year ended December 31, 2020, net cash flows used in operating activities was $4,187,000, due primarily to a

net loss of $4,667,000, change in operating asset and liabilities of approximately $612,000, partially offset

by share based compensation expenses (non-cash item) of approximately $1,107,000.

the fiscal year ended December 31, 2020, net cash flows used in investing activities was $276,000, due primarily to purchase of

property and equipment.

the fiscal year ended December 31, 2020, net cash flows provided by financing activities was $4,506,000, due primarily to proceeds

from issuance of shares and warrants of approximately $2,858,000 and proceeds from exercise from warrants of approximately $1,729,000.

of the Year Ended December 31, 2019 and the Year Ended December 31, 2018

was formed in Israel on January 3, 2019, as a wholly owned subsidiary of Medigus, and commenced operations on March 1, 2019.

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In December 2019, Medigus

and ScoutCam consummated an Amended and Restated Asset Transfer Agreement, which transferred and assigned certain assets

and intellectual property rights related to its miniaturized imaging business.

and ScoutCam consummated an Amended and Restated Asset Transfer Agreement, which transferred and assigned certain assets and intellectual

property rights related to its miniaturized imaging business.

March 1, 2019, 12 employees moved from Medigus to ScoutCam.

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Sales and marketing expense

General and administrative expenses

administrative expenses

Operating Loss

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tables below set forth our revenues by product:

camera and related equipment

increase in revenues from miniature camera and related equipment was primarily due to an overall increase

in the sales of the Company’s products to occasional customers.

Miniature camera

and related equipment

increase in revenues from miniature camera and related equipment was primarily due to an overall increase in the sales of the

Company’s products to occasional customers.

decrease in revenues from services was primarily due to:

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$130,000 (see ‘Customer A’

in note 11b to our financial statements for the year ended December 31, 2019).

in note 11 to our financial statements for the year ended December 31, 2020).

During year ended December 31, 2019 we recorded revenues for development services provided to this customer in the amount

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$87,000 (see ‘Customer B’

in note 11b to our financial statements for the year ended December 31, 2019).

in note 11 to our financial statements for the year ended December 31, 2020).

We did not receive any revenue from development services from this customer during the year ended December 31, 2019.

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increase in cost of revenues was due to:

changes in products and services mix;

in payroll expenses and allocation of other expenses, as

result of the Reorganization (as described under “Overview”) and allocating employees salaries from research and

development line item to the cost of revenues line item due to the nature of their current work.

in products and services mix;

in payroll expenses and allocation of other expenses, as result of the Reorganization (as described under “Overview”)

and allocating employees salaries from research and development line item to the cost of revenues line item due to the nature

of their current work.

Profit (Loss)

loss for the year ended December 31, 2019 was $233,000, a decrease of $403,000 compared to a gross profit of $170,000

for the year ended December 31, 2018.

The decrease was primarily due to changes in profitability margins of the product

and services mix and due to an increase in payroll expenses as described above.

loss for the year ended December 31, 2019 was $233,000, a decrease of $403,000 compared to a gross profit of $170,000 for the

year ended December 31, 2018.

The decrease was primarily due to changes in profitability margins of the product and services mix

and due to an increase in payroll expenses as described above.

and Development Expenses

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In 2018, the salary cost of R&D employees were split among all of Medigus’s activities.

Hence, in the

2018 data provided above, most of the salary costs of these employees are not included.

Hence, in the 2018 data provided

above, most of the salary costs of these employees are not included.

and Marketing Expenses

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to $240,000 for the year ended December 31, 2018.

The increase was primarily due to an increase in payroll expenses, as

result of the Reorganization (as described under “Overview”) and an increase in professional services.

increase in professional services is due to establishing ScoutCam Ltd.

as an independent company and due

to the acquisition of ScoutCam Ltd.

incurred an operating loss of $1,807,000 for the year ended December 31, 2019, an increase of $1,284,000, or 246%,

compared to operating loss of $523,000 for the year ended December 31, 2018.

The increase in operating results was due to an

increase of $403,000 in gross loss, an increase of $91,000 in research and development expenses, and increase

of $877,000 in administrative and general expenses partially offset by an $87,000 decrease in sales and marketing expenses.

The increase was primarily due to an increase in payroll expenses, as result

of the Reorganization (as described under “Overview”) and an increase in professional services.

The increase in professional

services is due to establishing ScoutCam Ltd.

as an independent company and due to the acquisition of ScoutCam Ltd.

incurred an operating loss of $1,807,000 for the year ended December 31, 2019, an increase of $1,284,000, or 246%, compared to

operating loss of $523,000 for the year ended December 31, 2018.

The increase in operating results was due to an increase of $403,000

in gross loss, an increase of $91,000 in research and development expenses, and increase of $877,000 in administrative and general

expenses partially offset by an $87,000 decrease in sales and marketing expenses.

and Capital Resources

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over one year in monthly payments beginning on the Closing Date.

As of the date of the Closing Date, ScoutCam has withdrawn the

entire amount of the line of credit.

December 2019, the Company allotted in a private issuance, a total of 3,413,312 units at the price of USD $0.968 per unit.

unit was comprised of two shares of Common Stock, one Warrant A (defined below) and two Warrants B (defined below).

The immediate

proceeds (gross) from the issuance of the units amounted to approximately USD 3.3 million.

Each Warrant A is exercisable into

one share of Common Stock at an exercise price of USD 0.595 per share during the 12 month period following the allotment.

Warrant B is exercisable into one share of Common Stock at an exercise price of USD 0.893 per share during the 18 month period

As of the Closing Date, ScoutCam has withdrawn the entire amount

of the line of credit.

December 30, 2019, the Company allotted in a private issuance, a total of 3,413,312 units at the price of USD $0.968 per

Each unit was comprised of two shares of Common Stock, one Warrant A (defined below) and two Warrants B (defined below).

The immediate proceeds (gross) from the issuance of the units amounted to approximately USD 3.3 million.

Each Warrant A is exercisable

into one share of Common Stock at an exercise price of USD 0.595 per share during the 12 month period following the allotment.

Each Warrant B is exercisable into one share of Common Stock at an exercise price of USD 0.893 per share during the 18 month period

following the allotment.

6 unchanged sentences

As of December 31, 2018, our total assets were $516,000.

of assets was mainly due to an increase of cash and cash equivalents as a result of the private issuance as described

above and increase of inventory.

of assets was mainly due to an increase of cash and cash equivalents as a result of the private issuance as described above and

increase of inventory.

As of December 31, 2019, our total liabilities were $2,235,000.

As of December 31, 2018, our

total liabilities were $634,000.

The increase of liabilities was mainly due to an increase of contract liabilities, a loan

from Medigus, accrued compensation expenses and other accrued expenses.

the year ended December 31, 2019, the Company incurred losses of $1,829 thousands and negative cash flow from operating

activities of approximately $1,799 thousands.

Based on the projected cash flows, the Company’s Management is of the

opinion that without further fundraising it will not have sufficient resources to enable it to continue its operating activities,

including the development, manufacturing and marketing of its products for a period of at least 12 months from the financial

statements issuance date.

As a result, there is substantial doubt about the Company’s ability to continue as

a going concern.

As of December 31, 2018, our total liabilities

were $634,000.

The increase of liabilities was mainly due to an increase of contract liabilities, a loan from Medigus, accrued

compensation expenses and other accrued expenses.

the year ended December 31, 2019, the Company incurred losses of $1,829,000 and negative cash flow from operating activities

of approximately $1,799,000.

Based on the projected cash flows, the Company’s Management is of the opinion that without

further fundraising it will not have sufficient resources to enable it to continue its operating activities, including the development,

manufacturing and marketing of its products for a period of at least 12 months from the financial statements issuance date.

a result, there is substantial doubt about the Company’s ability to continue as a going concern.

Management’s

3 unchanged sentences

Company will be successful in obtaining the level of financing needed for its operations.

If the Company is unsuccessful

in commercializing its products and securing sufficient financing, it may need to reduce activities, curtail or even cease operations.

If the Company is unsuccessful in commercializing

its products and securing sufficient financing, it may need to reduce activities, curtail or even cease operations.

following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):

Cash used in Operating Activity

Cash provided by (used in) Investing Activity

Cash provided by (used in) Investing

Cash provided by Financing Activity

For the fiscal year

ended December 31, 2019, net cash flows used in operating activities was $1,799,000, compared to net cash flows used in operating

activities of $454,000 for the fiscal year ended December 31, 2018, an increase of $1,345,000.

The change was mainly due to an

increase in net loss, increase in inventory, and partially offset by increase in contract liability, increase in accrued

compensation expenses and increase in other current expenses.

the fiscal year ended December 31, 2019, net cash flows used in operating activities was $1,799,000, compared to net cash flows

used in operating activities of $454,000 for the fiscal year ended December 31, 2018, an increase of $1,345,000.

The change was

mainly due to an increase in net loss, increase in inventory, and partially offset by increase in contract liability, increase

in accrued compensation expenses and increase in other current expenses.

the fiscal year ended December 31, 2019, net cash flows used in investing activities was $55,000, compared to net cash flows provided

2 unchanged sentences

and equipment during 2019.

the fiscal year ended December 31, 2019, net cash flows provided by financing activities was $5,104,000, compared to net

cash flows provided by financing activities of $450,000 for the fiscal year ended December 31, 2018.

The change between

the two periods is due to the fact that in 2019 we have transfer of assets to Medigus, capital contribution from Medigus, loan

from Medigus and cash acquired in connection with the reverse merger.

the fiscal year ended December 31, 2019, net cash flows provided by financing activities was $5,104,000, compared to net cash

flows provided by financing activities of $450,000 for the fiscal year ended December 31, 2018.

The change between the two periods

is due to the fact that in 2019 we have transfer of assets to Medigus, capital contribution from Medigus, loan from Medigus and

cash acquired in connection with the reverse merger.

Funding Requirements

believe that it will require additional financing in order to provide the capital it needs to hit its growth targets.

believe that it will require additional financing in order to provide the capital we need in order to hit our growth targets.

Sheet Arrangements

1 unchanged sentence

a smaller reporting company, we are not required to provide the information required by this Item.

financial statements and supplementary data

information called for by Item 8 is included following the “Index to Financial Statements”

on page F-1 of this Annual

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity