What changed in this filing

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Item 1. Business

2024-03-26 compared with 2023-03-28 · 227 added, 145 removed, 209 unchanged (64% of the section changed)

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portion of our revenue from applications of our micro visualization technology within the medical field.

Nevertheless, we have recently

secured several contracts for our PdM and CBM systems with major government clients and defense and aviation companies.

Business Model

unique video-based sensors, embedded software, and AI algorithms are being deployed in hard-to-reach locations and harsh

environments across a variety of PdM and CBM use cases.

Our solution allows maintenance and operations teams visibility into areas

which are inaccessible under normal circumstances, or where the operating ambience otherwise is not suitable for continuous

real-time monitoring, and has various applications which have relevancy in a wide range of industry segments that utilize

complicated mechanics requiring ongoing monitoring and predictive maintenance applications.

Our current business model is a

business-to-business (B2B) approach in which we seek to identify target businesses interested in integrating our micro visualization

technology or commissioning individual projects using our technology.

We have several successful proof of concepts in airborne

platforms of various OEM’s in aerospace and have completed a successful demonstration project for a top global elevator

systems manufacturer.

As provided above, we are developing additional applications for our visual solutions portfolio (composed of

image acquisition, data collection, and storage and image processing), including PdM and CBM (we refer to these applications and

sectors as Industry 4.0, or I4.0), which generate a number of potential benefits for our customers.

following graphic demonstrates ScoutCam’s value proposition, starting with increased safety and reduced down time due to our ability

to visually analyze any failure occurrence in real time, and including more sophisticated benefits like big data analytics that provide

predictive insights regarding to an entire system life cycle, spare parts management and smart prediction regrading system performance.

unique video-based sensors, embedded software, and AI algorithms are being deployed in hard-to-reach locations and harsh environments

across a variety of PdM and CBM use cases.

Our solution allows maintenance and operations teams visibility into areas which are inaccessible

under normal circumstances, or where the operating ambience otherwise is not suitable for continuous real-time monitoring and has various

applications which have relevancy in a wide range of industry segments that utilize complicated mechanics requiring ongoing monitoring

and predictive maintenance applications.

Our current business model is a business-to-business (B2B) approach in which we seek to identify

target businesses interested in integrating our micro visualization and AI\ML video analytics technology or commissioning individual

projects using our technology.

We have several successful proofs of concept in airborne platforms of various OEM’s in aerospace

and have completed successful demonstration projects for multiple global elevator systems manufacturers.

As provided above, we are developing

additional applications for our visual solutions portfolio (composed of image acquisition, data collection, and storage and image processing),

including PdM and CBM (we refer to these applications and sectors as Industry 4.0, or I4.0), which generate a number of potential benefits

for our customers.

following graphic demonstrates Odysight.ai’s value proposition, starting with increased safety and reduced down time due to our

ability to visually analyze any failure occurrence in real time, and including more sophisticated benefits like big data analytics that

provide predictive insights regarding to an entire system life cycle, spare parts management and smart prediction regrading system performance.

History and Background

were incorporated as a corporation under the laws of the State of Nevada on March 22, 2013, under the name Intellisense Solutions Inc.

We were initially engaged in the business of developing web portals to allow companies and individuals to engage in the purchase and

sale of vegetarian food products over the Internet.

However, we were unable to execute our original business plan, develop significant

operations or achieve commercial sales.

(“Intellisense”).

We were initially engaged in the business of developing web portals to allow companies and individuals

to engage in the purchase and sale of vegetarian food products over the Internet.

However, we were unable to execute our original business

plan, develop significant operations or achieve commercial sales.

received initial funding in March 2014 in the aggregate amount of $19,980 through the sale of Common Stock to two of our former officers

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on December 4, 2019, we sold 100% of our holdings in Canna Patch.

September 16, 2019, Intellisense and Medigus Ltd., an Israeli company traded on the Nasdaq Capital Market, entered into an Exchange Agreement

(as defined herein).

December 30, 2019, we acquired ScoutCam Ltd.

As a result of our acquisition of ScoutCam Ltd., we now own all of ScoutCam Ltd.’s

issued and outstanding share capital and have integrated and adopted ScoutCam Ltd.’s business into our Company as our primary business

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

ScoutCam Ltd.

was incorporated as part of a reorganization of Medigus, which was designed to distinguish ScoutCam Ltd.’s

miniaturized imaging business, or the micro ScoutCam™ portfolio, from Medigus’ other operations and to enable Medigus to

form a separate business unit with dedicated resources focused on the promotion of such technology.

On December 1, 2019, Medigus and

September 16, 2019, Intellisense and Medigus Ltd., an Israeli company traded on the Nasdaq Capital Market, entered into the Exchange

Agreement, pursuant to which, on December 30, 2019, we acquired from Medigus Ltd.

all of the issued and outstanding share capital of

ScoutCam Ltd.

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

intellectual property rights related to its miniaturized imaging business.

On May 18, 2020, in connection with the Arkin Transaction

(as defined below), the Company and Medigus entered into a certain Side Letter Agreement (the “Letter Agreement”), whereby

the parties agreed to amend certain terms of the Amended and Restated Asset Transfer Agreement and the License Agreement.

April 20, 2020, ScoutCam Ltd.

entered into an Amended and Restated Intercompany Services Agreement with Medigus (the “Intercompany

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

Following this acquisition, we integrated and fully adopted

the acquired miniaturized imaging business into our Company as our primary business activity.

On June 5, 2023, we changed our name to

Odysight.ai Inc.

December 1, 2019, Medigus and Odysight.ai Ltd.

consummated a certain Amended and Restated Asset Transfer Agreement, which transferred

and assigned certain assets and intellectual property rights related to its miniaturized imaging business.

On May 18, 2020, in connection

with the Arkin Transaction (as defined below), the Company and Medigus entered into a certain Side Letter Agreement (the “Letter

Agreement”), whereby the parties agreed to amend certain terms of the Amended and Restated Asset Transfer Agreement and the License

April 20, 2020, Odysight.ai entered into an Amended and Restated Intercompany Services Agreement with Medigus (the “Intercompany

Services Agreement”), which effectively amended and restated an intercompany services agreement dated May 30, 2019.

additional information about the Exchange Agreement, the Amended and Restated Asset Transfer Agreement, the Letter Agreement and the

Intercompany Services Agreement, refer to – “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE”

additional information about the Amended and Restated Asset Transfer Agreement, the Letter Agreement and the Intercompany Services Agreement,

refer to – “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” below.

4, 2023, certain of the Company’s stockholders representing more than 50% of the Company’s outstanding share capital voted

by written consent to change our name from “ScoutCam Inc.” to “Odysight.ai Inc.” The Company’s board of

directors approved an amendment and restatement of the Company’s Amended and Restated Bylaws, effective as of June 4, 2023, to reflect

the name change.

In addition, on June 5, 2023, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment

to its Articles of Incorporation to effect the name change, with such request approved as of June 5, 2023.

In addition, the Company’s

trading symbol was changed from “SCTC” to “ODYS”, effective February 13, 2024.

On February 28, 2024, we formed a new company, D.

VIEW Ltd., wholly owned

by Odysight.ai Inc., to act as a local agent for the defense market in Israel.

and Marketing

vision is to become a leading provider of video analytics based, PdM solutions for the aerospace, other industry and medical critical

system markets.

engage companies seeking to add video visualization to their existing or new product(s) or considering the development of new products

that include micro video visualization.

Our approach to the medical market is ordinarily conducted in two phases.

During the first phase,

we conduct the research and development that is required in order to specify, design, develop, and produce the designated visualization

apparatus, for an agreed-upon compensation amount (e.g., a non-recurrent engineering fee).

During the second phase, we manufacture the

apparatus and offer it to the customer for an agreed-upon transfer price.

vision is to become a leading provider of visual sensing and AI\ML video analytics, PdM and CBM solutions for the aerospace, other industry

and medical critical system markets.

engage companies seeking to add real time visualization and analytics to their existing or new product(s) or considering the

development of new products that include miniature visualization sensors and failure detection capabilities.

Our approach to the

medical market ordinarily is conducted in two phases.

During the first phase, we conduct the research and development

that is required in order to specify, design, develop, and produce the designated visualization apparatus, for an agreed-upon

compensation amount (e.g., a non-recurrent engineering fee).

During the second phase, we manufacture the apparatus and offer it to

the customer for an agreed-upon transfer price.

the I4.0 domain, which target PdM and CBM applications, we engage with companies that wish to increase the monitoring capabilities of

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as a result of their actual condition rather than a strict maintenance schedule.

use of an image based platform in the fields of PdM and CBM provides richer and more informative data and insights than traditional sensing

use of a vision-based platform in the fields of PdM and CBM provides richer and more informative data and insights than traditional sensing

Together with the AI and ML models customized for the relevant use cases, we expect this will provide customers with a clearer

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with advanced unmanned aerial platforms.

July 31, 2023, we announced a collaboration with the Israel Aerospace Industries (IAI) through which the IAI will utilize our advanced

visual sensing and video analytics technology in a visual based health monitoring system for UH60 (Blackhawk) helicopters.

By harnessing

our multiple highly resilient video-based sensors, embedded software, video analytics and AI algorithms specifically designed for the

UH60 helicopter, this solution will provide real-time insights into the health of UH60 helicopters, improving safety measures, minimizing

downtime, optimizing spare parts management, and enabling the implementation of predictive maintenance strategies.

December 4, 2023, we announced a strategic partnership to develop advanced applications for aerospace and industrial markets worldwide

with SIPAL S.P.A., a leading company in Italy in the engineering sector.

The goal of the collaboration is a next generation maintenance

solution that will allow maintenance crews the ability to review and have real time visual inspection of an aircraft’s internal

system without the need for removing a single panel or a hatch.

February 20, 2024, we announced the receipt of a purchase order for our PdM system for the Israel Air Force Boeing AH-64 Apache

attack helicopter prototype.

The partnership marks a significant milestone, integrating our autonomous, visual monitoring and predictive

maintenance technology into a leading attack helicopter.

There are approximately 2,700 Boeing AH-64 Apache attack helicopters deployed

March 11, 2024, we announced the receipt of a purchase order exceeding $1 million from a major international defense contractor for our

visual sensing and AI analytics solution.

The systems will be installed in upgraded Lockheed Martin (Sikorsky) SH-60 Seahawk Maritime

Rotary Wing Aircraft of the Israel Air Force.

More than 4,000 UH-60 Black Hawk aircraft, and its variants such as the SH-60 Seahawk,

are in service worldwide today.

We estimate that the addressable market of rotary wing aircraft systems worldwide is more than a billion

order to engage new customers, we employ various marketing strategies.

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Diameter Video Camera Heads and Medical Devices and Visualization Probes containing them” in return for payment of royalties and

a grant-back license to ScoutCam of Sumita’s patent and patent applications related to fiber optics illumination.

a grant-back license to Odysight.ai of Sumita’s patent and patent applications related to fiber optics illumination.

For additional

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revenue in the near term.

In June 2022, we announced that we completed the verification and validation stage of our miniature camera

solution with this client and, on January 26, 2023, we announced that we had received an order from this client for $1.45 million.

addition, we derive a substantial portion of our revenue from applications of our micro visualization technology within the medical field.

addition, we announced the completion of a major development stage to equip Elbit Systems Ltd.’s leading defense UAS aerial platforms

with our real time video monitoring system.

In June 2022, we announced that we completed the verification and validation stage of our endoscopic camera

solution with this client and, on January 26, 2023, we announced that we had received a $1.45 million order from this client.

17, 2023, we announced a solidified purchase order with this client and that formal commitments under the purchase order amount to a

total of $3.3 million for fiscal year 2024.

are currently several companies that develop and provide monitoring solutions for PdM and CBM.

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and Restated Asset Transfer Agreement (the “Addendum”), the License Agreement and the Letter Agreement, and additional patent

assets developed by ScoutCam.

For additional information about the License Agreement refer to – “CERTAIN RELATIONSHIPS AND

RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE” below.

Under the Addendum, and subject to certain limitations as further set forth

therein, Medigus transferred to us the following material patent families in exchange for a license in connection with the marketing

and sale of the Medigus Ultrasonic Surgical Endostapler:

assets developed by us.

For additional information about the License Agreement refer to – “CERTAIN RELATIONSHIPS AND RELATED

PARTY TRANSACTIONS” below.

Under the Addendum, and subject to certain limitations as further set forth therein, Medigus transferred

to us the following material patent families in exchange for a license in connection with the marketing and sale of the Medigus Ultrasonic

Surgical Endostapler:

Patent family related to Integrated Endoscope Irrigation:

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This patent has been granted in Canada, Europe (validated in Germany, Spain, France, Great Britain and Italy),

Israel, Japan (original and divisional), and the United States (two patents), and has two pending continuations in the United States.

The expiration dates for the two patents in the United States are November 28, 2033 and February 28, 2033;

Israel, Japan (original and divisional), and the United States (three patents), and has one pending continuation in the United States.

The expiration dates for the three patents in the United States are November 28, 2033, February 28, 2033 and February 28, 2033, respectively;

Patent family related to Small Diameter Video Camera Heads and Medical Devices and Visualization Probes containing them:

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This patent has been granted in Japan, Korea, Israel, the United States (2 patents, original and continuation

in part), and Europe (3 patents, original and 2 divisionals, currently under appeal after opposition proceedings, validated in Germany,

France, Great Britain, and Italy).

The expiration dates for these patents are March 16, 2031 (for the patents in the United States),

and September 16, 2030 (for patents in each of the other aforementioned jurisdictions).

in part), and Europe (3 patents revoked after appeal in opposition proceedings).

The expiration dates for these patents are March 16,

2031 (for the patents in the United States), and September 16, 2030 (for patents in each of the other aforementioned jurisdictions).

a result of oppositional proceedings initiated by a third party in 2018, the Opposition Division of the EU Patent Office decided in 2019

to revoke two of the three European patents (EP 2.478.693 and EP 2.621.159) and in 2021 to maintain the third patent (EP 2.621.158).

Following appeals by Company and the third party of the 2019 and 2021 decisions, respectively, the Opposition Division of the EU Patent

Office is expected to hear and decide these matters in early 2024;

Following appeal hearings held in early 2024, the Board of Appeals revoked all three patents, with formal written decisions still pending.

The Company will decide whether to petition for further review of this matter after it receives the formal written decisions.

The revocations

are not expected to have a material impact on the Company’s current business operations.

a result of a supplemental examination filed by the Company regarding one of the U.S.

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to open reexamination proceedings for 23 of the 24 granted claims.

Patent Office is expected to conduct the reexamination proceedings

during the course of 2024;

addition, our intellectual property rights further include the following material patent applications filed by ScoutCam:

A Notice of Intent to Issue a Reexamination Certificate was issued on

March 21, 2024 and the certificate is expected to be issued during

the course of 2024.

addition, our intellectual property rights further include the following material patent applications filed by Odysight.ai:

Patent family related to Miniature Precision Medical Device:

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could not have been displayed or analyzed using existing systems.

This patent family includes a pending Patent Cooperation Treaty patent

application and national phase applications filed in Israel and the U.S.

If ultimately issued by the United States Patent and Trademark

Office, such patent would be expected to expire in early 2042.

Additional national phase patent application can be filed in other jurisdictions

by the end of July 2023.

have also applied for provisional applications relating to our predictive maintenance innovative technology and developments.

these applications are expected to have a lifetime of 20 years from filing.

This patent family includes national phase applications filed in Australia,

Brazil, Canada, China, Europe, Israel, India, Japan, Korea, Singapore and the U.S.

(2 applications, original granted and a pending continuation

application).

The expiry date for the United States patent is January 2043.

have also applied for provisional applications relating

to our predictive maintenance technology and developments and for our medical imaging technology and development.

All of these applications

are expected to have a lifetime of 20 years from filing, if granted.

have also applied for trademark applications covering our brand names.

The trademarks are registered in Israel and international

applications were filed under the Madrid protocol, which are under currently examination procedures.

Opposition proceedings have

been filed by a third party in the European Union Intellectual Property Office against the Company’s EU trademark applications

for “Odysight” and “OdysightAI”.

The opposition proceedings are expected to be finalized in

2024 or 2025.

to the Addendum, on February 7, 2023, we returned the patent family related to Camera Head to Medigus in return for a license from Medigus

to use the same patent family.

our efforts to protect our intellectual property, unauthorized parties may still copy or otherwise obtain and use our technology.

additional information, refer to – “WE MAY NOT BE SUCCESSFUL IN ENFORCING OUR INTELLECTUAL PROPERTY RIGHTS AGAINST THIRD

PARTIES” below.

PARTIES” above.

currently have approximately 49 full-time (or near full-time) employees.

This number is expected to grow.

We may recruit additional

employees to the R&D team.

We may recruit additional employees

to the R&D team.

and Development

R&D organization is responsible for the design, development, testing, and delivery of new technologies, features, products, and integrations

of our component parts.

Research and development employees are located primarily in our principal corporate office on Omer, Israel.

currently have approximately 21 employees in our research and development organization.

We intend to continue to invest in our research

and development capabilities.

R&D organization is responsible for the design, development, testing, and delivery of new technologies, features, products, and

integrations of our component parts.

We currently have approximately 24 employees engaged in research and development.

We intend to continue to invest in our research and development capabilities.

R&D efforts are focused on the following areas:

(i) maturing our multi camera solution based on advanced visualization sensor technologies

focusing on sensing, computing, and prediction, cooperating with customers for mutual development projects that demonstrate our technology

by reaching customer KPIs and (ii) our industrial cloud-based product, which leverages our already in place cloud environment to develop

mutual proof of concept and minimal valuable product for our customers that enable cloud base solutions for customer KPIs.

(i) maturing our multi camera solution based on advanced visual sensing and AI\ML

processing technologies focusing on sensing, computing, and prediction, cooperating with customers for mutual development projects that

demonstrate our technology by reaching customer KPIs and (ii) our industrial cloud-based product, which leverages our already in place

cloud environment to develop mutual proof of concept and minimal valuable product for our customers that enable cloud base solutions

for customer KPIs.

approach to regulation is generally determined based on a given project.

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Government Programs

a result of certain agreements between Medigus and ScoutCam Ltd.

a result of certain agreements between Medigus and Odysight.ai Ltd.

(for additional information about these agreements refer to –

“CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE” below) the Israel Innovation Authority, or the

IIA, approved a transfer of IIA know-how developed by Medigus in the framework of the Bio Medical Photonic Consortium, or the Medigus

Consortium, to ScoutCam Ltd.

“CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” below), the IIA approved a transfer of IIA know-how developed by Medigus

in the framework of the Bio Medical Photonic Consortium, or the Medigus Consortium, to Odysight.ai.

all rights and obligations with regard to the IIA under the Encouragement of Research, Development and Technological Innovation in the

Industry Law, 5744-1984, or the Innovation Law, in connection with such know-how now apply to ScoutCam Ltd.

following are details regarding the rights and obligations within the framework of ScoutCam Ltd.’s activity in the Medigus Consortium,

which continue to apply to ScoutCam Ltd.

notwithstanding the termination of the Medigus Consortium:

Industry Law, 5744-1984, or the Innovation Law, in connection with such know-how now apply to Odysight.ai.

following are details regarding the rights and obligations within the framework of our activity in the Medigus Consortium, which continue

to apply to us notwithstanding the termination of the Medigus Consortium:

property rights to information which has been developed belongs to the Medigus Consortium member that developed it.

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Manufacturing Obligation.

The terms of the grants under the Innovation Law require that we

manufacture the products developed with these grants in Israel.

Under the regulations promulgated

under the Innovation Law, the products may be manufactured outside Israel by us or by another

entity only if prior approval is received from the IIA (such approval is not required for

the transfer of less than 10% of the manufacturing capacity in the aggregate, in which case

a notice should be provided to the IIA).

In general, due to manufacturing outside Israel,

with respect to royalties bearing grants we would be required to pay royalties at an increased

rate, usually 1% in addition to the standard rate and increased royalties cap (between 120%

and 300% of the grants, depending on the manufacturing volume that is performed outside Israel).

The terms of the grants under the Innovation Law require that we manufacture the products developed with

these grants in Israel.

Under the regulations promulgated under the Innovation Law, the products may be manufactured outside Israel

by us or by another entity only if prior approval is received from the IIA (such approval is not required for the transfer of less

than 10% of the manufacturing capacity in the aggregate, in which case a notice should be provided to the IIA).

In general, due to

manufacturing outside Israel, with respect to royalties bearing grants we would be required to pay royalties at an increased rate,

usually 1% in addition to the standard rate and increased royalties cap (between 120% and 300% of the grants, depending on the manufacturing

volume that is performed outside Israel).

Transfer Limitation.

The Innovation Law restricts the ability to transfer, in any manner,

know-how funded directly or indirectly by the IIA (sale of products is not prohibited), unless

the IIA approves doing so and subject to the terms of the Innovation Law and of the IIA’s

The Innovation Law restricts the ability to transfer, in any manner, know-how funded directly or indirectly

by the IIA (sale of products is not prohibited), unless the IIA approves doing so and subject to the terms of the Innovation Law

and of the IIA’s approval.

other things, transfer of IIA funded know-how outside of Israel requires prior approval of IIA and in certain circumstances is subject

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royalties already paid to the IIA.

The regulations promulgated

under the Innovation Law establish a maximum payment of the redemption fee paid to the IIA under the above mentioned formulas and

differentiates between two situations:

(i) in the event that the company transfers its IIA funded know-how, in whole or in part,

or is sold as part of an M&A transaction, and subsequently ceases to conduct business in Israel, the maximum redemption fee under

the above mentioned formulas will be no more than six times the amount received (plus annual interest) for the applicable know-how

being transferred, or the entire amount received from the IIA, as applicable;

(ii) in the event that following the transactions described

asset sale of IIA funded know-how or transfer as part of an M&A transaction) the company continues to conduct its

research and development activity in Israel (for at least three years following such transfer and maintain staff of at least 75%

of the number of research and development employees it had for the six months before the know-how was transferred and keeps the same

scope of employment for such research and development staff), then the company is eligible for a reduced cap of the redemption fee

of no more than three times the amounts received (plus annual interest) for the applicable know-how being transferred.

special rules and payment formulas apply for certain kinds of transfers of know-how outside of Israel, such as R&D licenses.

Transfer of IIA-funded know-how outside of Israel not according to the R&D Law may give rise to financial exposure as well as

criminal liability.

Approval of the transfer

of IIA funded technology to another Israeli company may be granted only if the recipient assumes and abides by the provisions of

the Innovation Law and related regulations, including the restrictions on the transfer of know-how and manufacturing rights outside

of Israel (in addition, there will be an obligation to pay royalties to the IIA from the income of such sale transaction as part

of the royalty payment obligation).

Approval to manufacture

products outside of Israel or consent to the transfer of technology, if requested, might not be granted.

Furthermore, the IIA may

impose certain conditions on any arrangement under which it permits ScoutCam Ltd.

to transfer technology or development out of Israel.

regulations promulgated under the Innovation Law establish a maximum payment of the redemption fee paid to the IIA under the above

mentioned formulas and differentiates between two situations:

(i) in the event that the company transfers its IIA funded know-how,

in whole or in part, or is sold as part of an M&A transaction, and subsequently ceases to conduct business in Israel, the maximum

redemption fee under the above mentioned formulas will be no more than six times the amount received (plus annual interest) for the

applicable know-how being transferred, or the entire amount received from the IIA, as applicable;

(ii) in the event that following

the transactions described above (e.g.

asset sale of IIA funded know-how or transfer as part of an M&A transaction) the company

continues to conduct its research and development activity in Israel (for at least three years following such transfer and maintain

staff of at least 75% of the number of research and development employees it had for the six months before the know-how was transferred

and keeps the same scope of employment for such research and development staff), then the company is eligible for a reduced cap of

the redemption fee of no more than three times the amounts received (plus annual interest) for the applicable know-how being transferred.

In addition, special rules and payment formulas apply for certain kinds of transfers of know-how outside of Israel, such as R&D

Transfer of IIA-funded know-how outside of Israel not according to the R&D Law may give rise to financial exposure

as well as criminal liability.

of the transfer of IIA funded technology to another Israeli company may be granted only if the recipient assumes and abides by the

provisions of the Innovation Law and related regulations, including the restrictions on the transfer of know-how and manufacturing

rights outside of Israel (in addition, there will be an obligation to pay royalties to the IIA from the income of such sale transaction

as part of the royalty payment obligation).

to manufacture products outside of Israel or consent to the transfer of technology, if requested, might not be granted.

the IIA may impose certain conditions on any arrangement under which it permits Odysight.ai to transfer technology or development

out of Israel.

May 21, 2023, the Company was awarded an additional grant by the IIA.

The purpose of this grant is to support and enhance the Company’s

production capabilities.

Subject to the Company successfully achieving all predetermined milestones, the maximum grant amount that can

be received is NIS 1 million.

the Innovation Law and the terms of the grant, royalties on the revenues derived from sales of products developed with IIA funding will

be payable to the Israeli government, generally at the rate of 3%.

The royalty terms shall differ if we receive IIA approval to manufacture

or to transfer the rights to manufacture our products developed by way of the IIA grant outside of Israel.

The obligation to make these

payments terminates upon full repayment of the grant amount, subject to adjustment for fluctuation in the dollar/shekel exchange rate,

plus interest.

to the terms of the grant under the Innovation Law, recipients of funding from the IIA are prohibited from (i) manufacturing products

developed using IIA grants or derived from technology developed with IIA grants outside of Israel and (ii) transferring rights to manufacture

such products outside of Israel.

However, the IIA could, in special cases, approve the transfer of manufacturing or of manufacturing

rights of a product developed in an approved program or which resulted therefrom, outside of Israel.

If we were to receive approval to

manufacture or to transfer the rights to manufacture our products developed with IIA-funding outside of Israel, we would be required

to pay an increased total amount of royalties (possibly up to 300% of the grant plus interest), depending on the portion of total manufacturing

that was performed outside of Israel.

terms of the grant under the Innovation Law prohibit transferring or licensing our IIA-financed technologies, technologies derived therefrom,

and related intellectual property rights and know-how outside of Israel, except under limited circumstances and only with the approval

of the IIA and generally upon making a payment to the IIA.

If received, we could be required to pay the IIA an amount calculated in accordance

with the applicable formula set out in the applicable IIA grant track.

The scope of the support received, the royalties that we already

paid to the IIA, the amount of time that elapsed between the date on which the technology was transferred, the date on which the applicable

project performance period for the IIA grants was completed, the sale price, and the form of transaction are all factors to be taken

into account in calculating the amount of payment to the IIA in connection with a transfer or license of IIA-funded technologies.

repayment amount is subject to a maximum limit calculated in accordance with a formula set forth in the guidelines published by the IIA.

In addition, any decrease in the percentage of manufacturing performed in Israel of any product or technology, as originally declared

in the application to the IIA with respect to such product or technology, could require notification by us to or obtaining the approval

of the IIA, and could result in increased royalty payments to the IIA of up to 300% of the total grant amounts received in connection

with such product or technology, plus interest, depending on the portion of total manufacturing that was performed outside of Israel.

of the transfer or license of technology to residents of Israel is required and could be granted in specific circumstances, but only

if the recipient agrees to abide by the provisions of applicable law, including the restrictions on the transfer of know-how and the

obligation to pay royalties.

An additional royalty payment is generally required to be made from the consideration paid for such transfer.

State of Israel does not own any intellectual property rights in technology developed with IIA funding and there is no restriction on

the export of products manufactured using technology and know-how developed with IIA funding.

The technology and know-how are, however,

subject to transfer of technology and manufacturing rights restrictions as described above.

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 1. Business