What changed in this filing

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Item 9A. Controls and Procedures

2024-03-26 compared with 2023-03-28 · 974 added, 868 removed, 717 unchanged (72% of the section changed)

46 unchanged sentences

Benad Goldwasser †

Donnerstein †

Executive Officer

1 unchanged sentence

Technology Officer

of Research and Development

VP of Product Portfolio

Benad Goldwasser has served as chairman of our board of directors since December 26, 2019, and has served as chairman of ScoutCam

Ltd.’s board of directors since its inception.

On June 1, 2023, Ronen Rosenbloom

notified the Company that he would resign as a member of our board of directors effective immediately.

Rosenbloom advised the Company

that his resignation was not the result of any conflict with the Company or objection to any action taken by it.

On August 13, 2023, our board

of directors appointed Mr.

Nir Nimrodi to serve as a member of the board of directors.

On December 6, 2023, certain

of the Company’s stockholders representing more than 50% of the Company’s outstanding share capital as of November 30, 2023

voted by written consent to reelect Ms.

Inbal Kreiss and elect Mr.

Jackson Schneider and Ms.

Ronit Rubin as Class II directors of the

Company, with a term of office for each to expire at the third succeeding annual meeting of the stockholders after their election and

until their successors are duly elected and qualified.

February 21, 2024, the Company appointed Ms.

Yosef as VP of Finance, a position she is expected to begin on May 5, 2024.

continue to serve as Chief Financial Officer until such time as the new position is effective.

An announcement by the Company regarding

the appointment of a new chief financial officer will be forthcoming.

Benad Goldwasser has served as chairman of our board of directors since December 26, 2019, and has served as chairman of Odysight.ai’s

board of directors since its inception.

Goldwasser is a serial entrepreneur and retired urology medical doctor.

In 2016, Prof.

Goldwasser launched a venture capital fund partnered with SAIL, a Shanghai Government investment company.

has served as a member of the board of directors of Innoventric Ltd.

Goldwasser has served

as a member of the board of directors of Innoventric Ltd.

since 2017 and Inspira Technologies Ltd.

since January 2021.

2013-2016 Prof.

From 2013-2016

Goldwasser served as an external director of BioCanCell Ltd.

Goldwasser was the co-founder of Vidamed

Inc., Medinol Ltd., Rita Medical Inc., Optonol Ltd.

Goldwasser was the co-founder of Vidamed Inc.,

Medinol Ltd., Rita Medical Inc., Optonol Ltd.

and GI View Ltd.

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and Professor of Surgery at Tel-Aviv University.

Goldwasser holds an MD and MBA from Tel-Aviv University .

Donnerstein has served on our board of directors since December 26, 2019.

Donnerstein has been an entrepreneur for over 40 years

and is an industry veteran.

Donnerstein’s experience includes establishing businesses in multiple industries in Europe and

Most notably, in 2008 he established Rav Bariach 08 Industries Ltd (TASE:

BRIH) after buying the assets of its predecessor in

receivership and led its turnaround to become a leading security door manufacturer worldwide.

Donnerstein currently serves as the

Executive Chairman and majority shareholder of Rav Bariach.

Goldwasser holds MD and MBA degrees from Tel-Aviv University .

Schneider has served on our board of directors since December 6, 2023.

Schneider is currently a Senior Research Scholar at Columbia

University in New York, a position he has held since July 2023.

From January 2014 to November 2022, Mr.

Schneider served as President

and CEO of Embraer Defense & Security, a leading Latin American aerospace and defense company and, from August 2020 to August 2022,

he served as a visiting senior research fellow (non-resident) in the Department of War Studies at King’s College in London.

Schneider served in other capacities for Embraer and in a series of senior management positions for Mercedes-Benz Do Brasil

LTDA, Daimler-Chrysler (Mercedes-Benz), and Unilever do Brasil.

Schneider also served on the board of directors of Tempest S.A.,

Visiona Tecnologia Aerospacial S.A., and OGMA, the Portugal Aerospace Industry, each affiliated with Embraer, until April 2023.

serves on the advisory board or Board of Directors of Sonda Tecnologias (Brazil), Abra Aviation Group (London), and Mercedes-Benz Do

In addition, Mr.

Donnerstein is the Chairman of Rail Vision Ltd and, in 2014,

received the Israeli Industry Award from Israel’s Minister of Economy and Industry for his lifelong contribution to the Israeli

Industrial sector.

Rosenbloom has served as a member of our board since December 26, 2019.

Rosenbloom is an independent lawyer working out of a

self-owned law firm specializing in white collar offences.

Rosenbloom serves as chairman of the Israeli Money Laundering Prohibition

committee and the Prohibition of Money Laundering Committee of the Tel Aviv District, both of the Israel Bar Association.

Rosenbloom serves on the board of directors of Medigus Ltd.

previously served as a police prosecutor in the Tel Aviv District.

He has served as a member of the board of directors of Medigus Ltd.

since August 2018.

Rosenbloom holds an LLB from the Ono Academic College, an Israeli branch of University of Manchester.

Amit has served on our board of directors since December 26, 2019.

Since 2014, Mr.

Amit has served as a financial consultant to multiple

companies on matters related to, inter alia, mergers and acquisitions.

Amit currently serves as a member of the board of directors

for multiple Israeli public and private companies, including in the role of an external or independent director.

He has served as a member

of the board of directors of Inspira Technologies Ltd.

since June 2021.

Amit holds both a BA in economics and accounting and an MBA

from Tel-Aviv University.

Amit is a certified public accountant in Israel.

Schneider has served in leadership roles in various industry associations and is currently the President of

the Superior Council for Trade and Commerce in the Federation of Industries of the State of Sao Paulo (FIESP).

He holds a law degree

from 1982 to 1986 from UFRGS/UNB and an MBA from the Business School Sao Paulo (BSP) in Brazil in partnership with the Rotman School

in Toronto, Canada.

Rubin has served on our board of directors since December 6, 2023.

Rubin is currently EMEA President for AllCloud, a professional

services company providing organizations with the tools for cloud enablement and transformation, a position she has held since 2016.

Prior to this, Ms.

Rubin served as VP, Business Division and VP, Information Technology at Partner Communications Ltd.

and as VP, Information

Technology at Cal-Israel Credit Cards Ltd.

From 1984-2006, Ms.

Rubin served in various roles for the navy of the Israeli Defense Forces,

including as Commander, Computers Unit and Head of Information Systems Department.

She currently serves as a board member of CardCom

Rubin holds a BA in Economics & Logistics from Bar-Ilan University in Ramat Gan, Israel, and an MA in Business Management

from Ben-Gurion University of the Negev in Be’er Sheva, Israel.

(Mori) Arkin has served on our board of directors since February 15, 2021.

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Arkin holds a B.A.

in psychology from the Tel Aviv

University, Israel.

degree in psychology from the

Tel Aviv University, Israel.

Kreiss has served on our board of directors since April 9, 2021.

Kreiss is currently the Head of Innovation at the Systems,

Kreiss is currently the Chief of Innovation at the Systems,

Missiles and Space Division of the Israeli Aerospace Industries Ltd.

(IAI) and Chairwoman of RAKIA, Israel’s 2nd Scientific

and Technological Mission to the International Space Station.

(IAI) and Chairwoman of RAKIA, Scientific and Technological Mission

to the International Space Station.

Since 2013, Ms.

Kreiss has served as Deputy Director of the Space

Division at IAI, leading the development, construction, launch and operation of observation and communication satellites for both

Israeli and foreign users.

Kreiss has served as Deputy Director of the Space Division at IAI, leading the development,

construction, launch and operation of observation and communication satellites for both Israeli and foreign users.

Prior to that, Ms.

Kreiss held various leadership positions within IAI, including chief engineer of

Israel’s Arrow 2 anti-ballistic missile defense system from 2000 to 2006, and project manager of the Arrow 3 exo-atmospheric

interceptor from 2007 to 2013.

Kreiss serves on the board of directors or Rail Vision Ltd.

Kreiss holds a B.Sc in chemical

engineering from the Technion, Israeli Institute of Technology, an Executive Masters in Business Administration from Tel Aviv

University, and completed a visiting research fellowship at the Aeronautics & Astronautics Department of the Massachusetts

Kreiss held various leadership positions within IAI, including chief engineer of Israel’s Arrow 2 anti-ballistic missile defense

system from 2000 to 2006, and project manager of the Arrow 3 exo-atmospheric interceptor from 2007 to 2013.

Kreiss holds a B.Sc degree

in chemical engineering from the Technion, Israeli Institute of Technology, an Executive Masters in Business Administration degree from

Tel Aviv University, and completed a visiting research fellowship at the Aeronautics & Astronautics Department of the Massachusetts

Institute of Technology (MIT).

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and a member of the board of Bezeq the Israeli Telecommunication Corp.

BEZQ) since 2017.

Vurembrand has also served as chairman of the

board of Lageen Ltd.

Vurembrand also served as chairman of the board of Lageen Ltd.

from 2019 until December 2023.

From 2013 until 2019, Mr.

Vurembrand was the Chief Executive Officer of Kupat Holim Meuhedet, Israel’s

third largest health care organization.

From 2008 until 2013, he was the Chief Executive Officer of Alon Holding Blue Square –

Israel Ltd., and prior to that, from 2007 until 2008, he was the Chief Executive Officer of Phoenix Investments and Finance Ltd.

in his career, from 2002 until 2007, Mr.

Vurembrand was the Chief Executive Officer of Clalit Health Services Group, Israel’s largest

health care organization.

Vurembrand has served on numerous boards of directors, including Africa Israel Resedence LTD.

from 2014 until 2016, Discount Bank (TASE:DSCT) 2006 until 2007, U-Bank from 2005 until 2006, Blue Square Israel (TASE:

BSI) from 2001

until 2006, and Dikla Medical Insurance Ltd.

from 1995 until 2002.

Vurembrand has also served on the board of trustees of Bar Ilan

University since 2019.

Vurembrand holds a B.Sc in industrial engineering and management from the Technion, Israeli Institute of Technology.

Vurembrand was the Chief Executive Officer of Kupat Holim Meuhedet, Israel’s third largest health care organization.

until 2013, he was the Chief Executive Officer of Alon Holding Blue Square – Israel Ltd., and prior to that, from 2007 until 2008,

he was the Chief Executive Officer of Phoenix Investments and Finance Ltd.

Earlier in his career, from 2002 until 2007, Mr.

was the Chief Executive Officer of Clalit Health Services Group, Israel’s largest health care organization.

Vurembrand has

served on numerous boards of directors, including Africa Israel Residences LTD.

AFRE) from 2014 until 2016, Discount Bank (TASE:DSCT)

2006 until 2007, U-Bank from 2005 until 2006, Blue Square Israel (TASE:

BSI) from 2001 until 2006, and Dikla Medical Insurance Ltd.

1995 until 2002.

Vurembrand has also served on the board of trustees of Bar Ilan University since 2019.

Vurembrand holds a B.Sc

degree in industrial engineering and management from the Technion, Israeli Institute of Technology.

Nimrodi has served on our board of directors since August 13, 2023.

Nimrodi has served as chairman and chief executive

officer of Accellix Inc., a life sciences company, since May 2019 and has over 25 years’ experience working in start-ups and

large global businesses in the life sciences, pharmaceutical, and biotechnology industries.

From 2014 to April 2019, Mr.

the chief business officer of Intrexon (currently Precigen, Inc.).

Prior to this, he held several executive roles at Life

Technologies Inc.

(now part of Thermo Fisher), and was chief executive officer at Proneuron Biotechnologies Inc.

and Mindsense

Biosystems Ltd.

In addition, Mr.

Nimrodi currently serves as a member of the board of Evogene Ltd.

EVGN) and at the private

companies Genesee Scientific and Scopio Labs.

Nimrodi holds a B.A.

in Economics and an MBA from Tel-Aviv

Ofer has served as Chief Executive Officer of the Company since October 18, 2022.

Ofer served as a colonel (now retired) in the

IAF, commanding two operational squadrons before commanding “Wing 15”, the optic and electronic intelligence wing of the

Israeli Air Force (“IAF”), commanding two operational squadrons before commanding “Wing 15”, the optic and electronic

intelligence wing of the IAF.

In his last position, Mr.

Ofer served as Israel Defense Attaché to Italy, Greece, Serbia, and Croatia, where he oversaw the

largest ever government-to-government transaction between Israel and Italy.

Upon his retirement from the Israel Defense Forces in 2013,

Ofer served as Israel Defense Attaché to Italy, Greece, Serbia, and Croatia,

where he oversaw the largest ever government-to-government transaction between Israel and Italy.

Upon his retirement from the Israel

Defense Forces in 2013, Mr.

Ofer joined Elbit Systems Ltd.

in its electro-optics unit as a technology development and program manager in airborne optic and laser

Ofer also managed Elbit System’s aerospace division as VP of large-scale development programs and VP of the Brazil

business unit.

in its electro-optics unit as a technology development and program manager

in airborne optic and laser solutions.

Ofer also managed Elbit System’s aerospace division as VP of large-scale development

programs and VP of the Brazil business unit.

In his last position at Elbit Systems, Mr.

Ofer served as VP of Global Business Development, Marketing and Sales, a position

he held since 2020.

Ofer holds an MBA from the University of Haifa, a Bachelor of Economics and Logistics (cum laude) from Bar Ilan

University in Tel Aviv, and a degree from the National Security College in Tel Aviv.

Ofer served as VP of Global Business Development,

Marketing and Sales, a position he held since 2020.

Ofer holds an MBA degree from the University of Haifa, a Bachelor of Economics

and Logistics degree (cum laude) from Bar Ilan University in Tel Aviv, and a degree from the National Security College in Tel Aviv.

Yosef has served as our Chief Financial Officer since December 27, 2019.

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a member firm of PricewaterhouseCoopers International Limited.

Yosef holds a BA in Economics and Accounting from the Ben-Gurion University,

Govrin has served as our Chief Technology Officer since May 1, 2019.

Prior to his position with ScoutCam, Mr.

Govrin held various

positions at Medigus Ltd.

MDGS) beginning in 2003, including VP R&D, R&D manager and GERD project manager.

his tenure at Medigus, Mr.

Govrin was project manager at Aran R&D from 1997 until 2003, and an R&D engineer at Netafim Ltd.

1992 until 1997.

Govrin holds a B.Sc in mechanical engineering from Tel Aviv University, Israel .

Dlugach has served as our VP of Research and Development since July 1, 2019.

Prior to her position with ScoutCam, Ms.

a system engineer and project manager at Nanofabrica Ltd.

from August 2018 to June 2019.

Before that, Ms.

Dlugach served in a number

of roles, including chief of development and chief executive officer, at Nitinotes Ltd.

from 2014 until 2018.

Earlier in her career,

Dlugach held a variety of R&D positions at Medigus Ltd.

Dlugach holds a B.Sc., M.Sc.

and MBA from Ben-Gurion

Yosef holds a BA degree in Economics and Accounting from the Ben-Gurion

University, Israel .

Israeli has been our Chief Technology Officer since October 11, 2023.

Before joining us, Mr.

Israeli served from January 2022

to September 2023 as CTO at Gadfin, where he spearheaded the development and execution of Gadfin’s technology strategy.

From December

2019 to February 2022, Mr.

Israeli served as the Senior Vice President of System Engineering, Program Management, and Customer Success

at Israel Aerospace Industries (IAI) headquarters.

His career includes a variety of other roles, including Chairman of the consortium

of AI Academy - Artificial Intelligence Training;

Director of Program Management, Ground-Based & Missiles Defense Systems at IAI;

Director of System Engineer and Product Management, Civil Aircraft Protection Systems at the Israel Ministry of Defense – DDR&D;

Senior Systems Engineer, Unmanned Aerial Vehicle at the Israeli Air Force;

and Director of R&D and Program Management, MALE Unmanned

Aerial System at the Israeli Ministry of Defense - DDR&D.

Israeli holds an MSc in System Engineering and Program Management from

the Technion – Israel Institute of Technology in Haifa, Israel, and a BSc in electrical engineering and Bachelor of Education (BEd)

from Tel Aviv University.

Avinu has served as our Senior VP of Product Portfolio since November 15, 2022.

Avinu has more than 15 years of experience

in development, operations, and leadership in a variety of industries, including aviation and aerospace.

He joined ScoutCam from

Elbit Systems, where since 2018 he led the advanced capabilities R&D group in helmet-mounted displays and sensors, a key segment

within the company’s aerospace division.

Avinu has more than 15 years of experience in

development, operations, and leadership in a variety of industries, including aviation and aerospace.

He joined Odysight.ai from Elbit

Systems, where since 2018 he led the advanced capabilities R&D group in helmet-mounted displays and sensors, a key segment within

the company’s aerospace division.

Before joining Elbit Systems, Mr.

Avinu served for six years in the Israeli Air Force

as a computer vision system engineer and commander of the electronic systems development group.

Avinu holds a Master of Science

degree from Ben-Gurion University of the Negev in Beer-Sheva, Israel with a focus on electro-optical engineering, and a Bachelor of

Science in electrical engineering from Ort Braude College of Engineering in Karmiel Israel.

Avinu also studied practical

engineering and electronics at the Israeli Air Force Academy.

Priel has served as our Chief SW Architect since November 1, 2021.

Priel has over 20 years of experience in leading multidisciplinary

R&D and engineering teams in defining and navigating product development from concept to deployment, with a focus on cloud-based

architectures and AI-based technologies.

Prior to joining ScoutCam, Mr.

Priel held several senior technology positions, most recently

as CTO of Octopol from June 2019 to August 2021, where he combined state-of-the-art AI models together with cutting-edge software technology.

Prior to Octopol, Mr.

Priel served as Director of Technology at Green & Gold Analytics from March 2017 to June 2019, where he established

partnerships with Microsoft and Amazon Web Services.

Priel also previously served as VP R&D and established the Israeli Innovation

Center of Landesk (currently named Ivanti).

Priel earned both his BSc in Computer Science and Economics and MBA from Bar-Ilan University.

Avinu served for six years in the IAF as a computer vision

system engineer and commander of the electronic systems development group.

Avinu holds a Master of Science degree from Ben-Gurion

University of the Negev in Beer-Sheva, Israel with a focus on electro-optical engineering, and a Bachelor of Science degree in electrical

engineering from Ort Braude College of Engineering in Karmiel Israel.

Avinu also studied practical engineering and electronics at

the Israeli Air Force Academy.

board of directors is divided into three classes.

Ronen Rosenbloom and Zeev Vurembrand are our Class I directors, with their terms of

office to expire at our 2025 annual meeting of stockholders.

Lior Amit, Shmuel Donnerstein and Inbal Kreiss are our Class II directors,

with their terms of office to expire at our 2023 annual meeting of stockholders.

Professor Benad Goldwasser and Moshe (Mori) Arkin are

our Class III directors, with their terms of office to expire at our 2024 annual meeting of stockholders.

Zeev Vurembrand and Nir Nimrodi are our Class I directors, with their terms of office

to expire at our 2025 annual meeting of stockholders.

Jackson Schneider, Ronit Rubin and Inbal Kreiss are our Class II directors, with

their terms of office to expire at our 2026 annual meeting of stockholders.

Professor Benad Goldwasser and Moshe (Mori) Arkin are our

Class III directors, with their terms of office to expire at our 2024 annual meeting of stockholders.

At each annual meeting of stockholders,

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executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions).

We have made the code of business conduct and ethics available on our website at www.scoutcam.com.

We have made the code of business conduct and ethics available on our website at www.odysight.ai.

We will disclose promptly by posting

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The members of the audit committee are Ms.

Amit, and Mr.

Rubin, and Mr.

Vurembrand, with Mr.

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The audit committee is governed by a written charter approved by the board of directors and available on our website at

www.scoutcam.com.

www.odysight.ai.

The board of directors has determined that all current audit committee members are financially literate under the Nasdaq

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determined that Ms.

Amit, and Mr.

Rubin, and Mr.

Vurembrand meet the independence criteria established in the Nasdaq listing requirements

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audit committee assists the board of directors in its oversight of financial reporting practices and the quality and integrity of the

financial reports of ScoutCam including compliance with legal and regulatory requirements, the independent auditors’ qualifications

and independence, and the performance of ScoutCam’s internal control function.

financial reports of Odysight.ai including compliance with legal and regulatory requirements, the independent auditors’ qualifications

and independence, and the performance of Odysight.ai’s internal control function.

The audit committee is responsible for the appointment

of ScoutCam’s independent auditors.

of the Company’s independent auditors.

The audit committee oversees our internal controls and risk assessment and management policies

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The audit committee is responsible

for periodically reviewing ScoutCam’s code of business conduct and ethics and has established procedures for the receipt, retention,

and treatment of complaints received by ScoutCam regarding accounting controls or auditing matters and the confidential, anonymous submission

by ScoutCam employees of concerns regarding questionable accounting or auditing matters.

The audit committee is also responsible for

approving or ratifying related person transactions pursuant to ScoutCam’s related person transaction approval policy contained

for periodically reviewing the Company’s code of business conduct and ethics and has established procedures for the receipt, retention,

and treatment of complaints received by Odysight.ai regarding accounting controls or auditing matters and the confidential, anonymous

submission by Company employees of concerns regarding questionable accounting or auditing matters.

The audit committee is also responsible

for approving or ratifying related person transactions pursuant to the Company’s related person transaction approval policy contained

in the audit committee charter.

The members of the compensation committee are Ms.

Amit, and Mr.

Nimrodi, and Mr.

Vurembrand, with Ms.

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The compensation committee is

governed by a written charter approved by the board of directors and available on our website at www.scoutcam.com.

governed by a written charter approved by the board of directors and available on our website at www.odysight.ai.

The compensation committee

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Executive Compensation

Compensation Table

following sets forth information about the compensation paid to or accrued by the company’s principal executive officer and its

two other most highly compensated persons serving as executive officers as of December 31, 2022.

These executives are referred to as

the “named executive officers.”

and Principal Position

Awards (7) (8)

Other Compensation

Yovav Sameah,

Former Chief Executive Officer

following sets forth information about the compensation paid to or accrued by the company’s named executive officers, as that term

is defined in Item 402(m)(2) of Regulation S-K, as of December 31, 2023.

Name and Principal Position

Base Salary (7)

Stock Awards (8)

Option Awards

All Other Compensation

$ in thousands

Chief Executive Officer (1)

Senior VP Product (2)

Chief Technology Officer (4)

Sameah’s s compensation earned in his capacity as the Chief Executive Officer of wholly-owned subsidiary, ScoutCam Ltd.

Sameah did not earn any compensation in his capacity as the Chief Executive Officer of ScoutCam Inc.

Sameah’s employment

terminated on October 18, 2022.

Ofer’s compensation earned in his capacity as the Chief Executive Officer of

our wholly-owned subsidiary, ScoutCam Ltd.

Ofer did not earn any compensation in his

capacity as the Chief Executive Officer of ScoutCam Inc.

Ofer’s employment commenced

on October 18, 2022.

Chief Financial Officer (3)

Chief Software Architect (4)

VP Research and Development (5)

Ofer’s compensation earned in his capacity as the Chief Executive Officer of our wholly-owned subsidiary, Odysight.ai

Ofer did not earn any compensation in his capacity as the Chief Executive Officer of Odysight.ai Inc.

Ofer’s employment

commenced on October 18, 2022.

connection with the appointment of Mr.

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agreement with Mr.

Ofer that provides for the terms and conditions of his employment as the Company’s Chief Executive Officer.

The agreement provides for a monthly base salary of NIS 70,000, subject to adjustments for inflation as announced from time to time

in accordance with Israeli law.

The agreement provides for a monthly base salary of NIS 70,000, subject to adjustments for inflation as

announced from time to time in accordance with Israeli law.

The agreement also provides that Mr.

Ofer is entitled to receive an equity grant of options to purchase

a total of 300,000 shares of the Company’s common stock, par value $0.001 per share, at an exercise price of $4.50 per share,

which shall vest and become exercisable as follows:

Ofer is entitled to receive an equity

grant of options to purchase a total of 300,000 shares of the Company’s Common Stock, par value $0.001 per share, at an exercise

price of $4.50 per share, which shall vest and become exercisable as follows:

33.33% of the shares covered by Mr.

Ofer’s options on the first anniversary

of his service as CEO, and 8.33% of the shares covered by Mr.

Ofer’s options at the end of each subsequent three-month period

thereafter over the course of the subsequent two years.

Ofer’s options

on the first anniversary of his service as CEO, and 8.33% of the shares covered by Mr.

Ofer’s options at the end of each subsequent

three-month period thereafter over the course of the subsequent two years.

Furthermore, Mr.

Ofer’s options will immediately vest upon the occurrence

of the following (i) the sale of all or substantially all of the assets of the Company, (ii) the sale of more than 50% of the common

stock of the Company in a non-public sale, (iii) the dissolution or liquidation of the Company or (iv) any merger, share exchange,

consolidation or other reorganization or business combination if immediately after such transaction either (A) the persons who were

directors of the Company immediately prior to such transaction do not constitute at least a majority of the directors of the surviving

entity or (B) the persons who hold a majority of the voting capital stock of the surviving entity are not the persons who held a

majority of the voting capital stock of the Company immediately prior to such transaction.

Additionally, the Company agreed to pay

Ofer both (i) a signing bonus in the aggregate amount of NIS 70,000 and (ii) an annual bonus pursuant to certain pre-determined

measurable objectives agreed to with Mr.

Ofer and approved by the board of directors by January 31 with respect to each calendar

year, with the Company agreeing to recommend to the board of directors a grant of restricted stock in lieu of Mr.

through such time the Company is profitable and subject to meeting applicable objectives.

In accordance with the terms of Mr.

employment agreement, he will also receive additional benefits customary for an executive officer of his experience and for companies

of similar stature and standing to that of the Company.

Avinu’s compensation earned in his capacity as the Senior VP Product of our

wholly-owned subsidiary, ScoutCam Ltd.

Ofer’s options will immediately

vest upon the occurrence of the following (i) the sale of all or substantially all of the assets of the Company, (ii) the sale of

more than 50% of the Common Stock of the Company in a non-public sale, (iii) the dissolution or liquidation of the Company or (iv)

any merger, share exchange, consolidation or other reorganization or business combination if immediately after such transaction either

(A) the persons who were directors of the Company immediately prior to such transaction do not constitute at least a majority of

the directors of the surviving entity or (B) the persons who hold a majority of the voting capital stock of the surviving entity

are not the persons who held a majority of the voting capital stock of the Company immediately prior to such transaction.

Additionally,

the Company agreed to pay Mr.

Ofer both (i) a signing bonus in the aggregate amount of NIS 70,000 and (ii) an annual bonus pursuant

to certain pre-determined measurable objectives agreed to with Mr.

Ofer and approved by the board of directors by January 31 with

respect to each calendar year, with the Company agreeing to recommend to the board of directors a grant of restricted stock in lieu

Ofer’s bonus through such time the Company is profitable and subject to meeting applicable objectives.

In accordance

with the terms of Mr.

Ofer’s employment agreement, he will also receive additional benefits customary for an executive officer

of his experience and for companies of similar stature and standing to that of the Company.

Avinu’s compensation earned in his capacity as the Senior VP Product of our wholly-owned subsidiary, Odysight.ai Ltd.

Avinu’s employment commenced on November 15, 2022.

1 unchanged sentence

Avinu as the Company’s Senior VP Product, the Company entered into an employment agreement

Avinu that provides for the terms and conditions of his employment as the Company’s Senior VP Product.

The agreement

provides for a monthly salary of NIS 60,000.

The agreement provides for a monthly salary of NIS 60,000.

The agreement also provides that Mr.

Avinu is entitled to receive an equity grant of

options to purchase a total of 100,000 shares of the Company’s common stock, par value $0.001 per share, at an exercise price

of $4.50 per share, which shall vest and become exercisable as follows:

33.33% of the shares covered by Mr.

Avinu’s options

on the first anniversary of his service as SVP Product, and 8.33% of the shares covered by Mr.

Avinu’s options at the end of

each subsequent three-month period thereafter over the course of the subsequent two years.

Additionally, the agreement provides to

(i) a signing bonus in the aggregate amount of NIS 50,000 (ii) a performance bonus in the aggregate amount of NIS 120,000

pursuant to certain objectives and (iii) the Company will consider, at to its sole discretion, after the first and second years following

his employment, granting Mr.

Avinu additional options / RSUs pursuant to certain objectives, subject to the approval of such grant

by the CEO and board of directors of the Company.

Avinu is entitled

to receive an equity grant of options to purchase a total of 100,000 shares of the Company’s Common Stock, par value $0.001

per share, at an exercise price of $4.50 per share, which shall vest and become exercisable as follows:

33.33% of the shares covered

Avinu’s options on the first anniversary of his service as SVP Product, and 8.33% of the shares covered by Mr.

options at the end of each subsequent three-month period thereafter over the course of the subsequent two years.

Additionally, the

agreement provides to Mr.

(i) a signing bonus in the aggregate amount of NIS 50,000 (ii) a performance bonus in the aggregate

amount of NIS 120,000 pursuant to certain objectives and (iii) the Company will consider, at to its sole discretion, after the first

and second years following his employment, granting Mr.

Avinu additional options / RSUs pursuant to certain objectives, subject to

the approval of such grant by the CEO and board of directors of the Company.

In accordance with the terms of Mr.

Avinu’s employment agreement, he will

also receive additional benefits customary for an executive officer of his experience and for companies of similar stature and standing

to that of the Company.

Govrin’s compensation earned in his capacity as the Chief Technology Officer

of our wholly-owned subsidiary, ScoutCam Ltd.

Govrin did not earn any compensation in

his capacity as the Chief Technology Officer of ScoutCam Inc.

Avinu’s employment

agreement, he will also receive additional benefits customary for an executive officer of his experience and for companies of similar

stature and standing to that of the Company.

Yosef’s compensation earned in her capacity as the Chief Financial Officer of our wholly-owned subsidiary, Odysight.ai

Yosef did not earn any compensation in her capacity as the Chief Financial Officer of Odysight.ai Inc.

employment commenced on January 15, 2021.

connection with the appointment of Ms.

Yosef as the Company’s Chief Financial Officer, the Company entered into an employment

agreement with Ms.

Yosef that provides for a monthly base salary of NIS 29,500 and monthly travel pay of NIS 2,500.

In accordance

with the terms of Ms.

Yosef’s employment agreement, she will also receive additional benefits customary for an executive officer

of her experience and for companies of similar stature and standing to that of the Company.

Priel’s compensation earned in his capacity as the Chief Software Architect of our wholly-owned subsidiary, Odysight.ai

Priel’s employment commenced on November 1, 2021.

connection with the appointment of Mr.

Govrin as the Company’s Senior VP Product in May 2019, the Company entered into an employment

Priel as the Company’s Chief Software Architect, the Company entered into an employment

agreement with Mr.

Govrin that provides for a monthly base salary of NIS 37,000.

Priel that provides for a monthly base salary of NIS 60,000.

In accordance with the terms of Mr.

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of similar stature and standing to that of the Company.

Effective April 1, 2022, Mr.

Govrin received an increase in his monthly base

salary to NIS 41,000.

Molad’s compensation earned in his capacity as the VP Research and Development of our wholly-owned subsidiary, Odysight.ai

Molad’s employment commenced on June 4, 2023.

connection with the appointment of Mr.

Molad as the Company’s VP Research and Development, the Company entered into an employment

agreement with Mr.

Molad that provides for a monthly base salary of NIS 56,000 and monthly travel pay of NIS 6,500.

The agreement

also provides that Mr.

Molad is entitled to receive an equity grant of options to purchase a total of 30,000 shares of the Company’s

Common Stock, par value $0.001 per share, and 25,000 RSUs, the terms and conditions of which shall be subject to the sole discretion

of the board of directors.

Additionally, the agreement provides to Mr.

(i) a signing bonus in the aggregate amount of NIS

75,000 and (ii) a performance bonus pursuant to certain objectives, which will be paid in cash and/or options/RSUs at the sole discretion

of the Company.

In accordance with the terms of Mr.

Molad’s employment agreement, he will also receive additional benefits

customary for an employee of his experience and for companies of similar stature and standing to that of the Company.

a signing bonus.

salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered

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dollar and NIS, as published by the Bank of Israel.

a signing bonus.

amount shown in the “Option Awards” and “Stock Awards” columns represents the aggregate grant date fair value

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required for the grant to vest.

The fair value of each stock option award is estimated as of the date of

grant using the Black-Scholes valuation model.

Additional information regarding the assumptions used to estimate the fair value of all

stock option awards is included in Note 9b-c to Consolidated Financial Statements.

and through our Israeli subsidiary, have entered into written employment agreements with each of our executive officers.

agreements contain customary provisions regarding noncompetition, confidentiality of information, and assignment of inventions.

the enforceability of the noncompetition provisions may be limited under applicable law.

In addition, we have entered into agreements

with each executive officer and director pursuant to which we have agreed to indemnify each of them to the fullest extent permitted by

law to the extent that these liabilities are not covered by directors and officers insurance.

fair value of each stock option award is estimated as of the date of grant using the Black-Scholes valuation model.

and through our wholly-owned subsidiary, Odysight.ai Ltd., have entered into written employment agreements with each of our executive

All of these agreements contain customary provisions regarding noncompetition, confidentiality of information, and assignment

of inventions.

However, the enforceability of the noncompetition provisions may be limited under applicable law.

In addition, we have

entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them to the fullest

extent permitted by law to the extent that these liabilities are not covered by directors and officers’ insurance.

Equity Awards

following table provides information regarding equity awards for each of our named executive officers, as that term is defined in Item

402(m)(2) of Regulation S-K as of our fiscal year end of December 31, 2022.

following table provides information regarding equity awards for each of our named executive officers as of our fiscal year end of December

Options Award

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of Securities Underlying Unexercised Options (#) Unexercisable

Exercise Price ($)

Expiration Date

Option Exercise Price ($)

Vesting Schedule

Option Expiration Date

Number of Units of Stock That Have Not Vested (#)

Market Value of Units of Stock That Have Not Vested ($)(1)

Yovav Sameah,

October 18, 2025

Former Chief Executive Officer

Chief Executive Officer

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November 14, 2029

Chief Financial Officer

February 12, 2027

Chief Technology Officer

(1) Based on the fair

market value of our Common Stock on December 31, 2022 ($5.00 per share).

(2) 25% of the options

granted will vest on the first anniversary date of the option grant, and 6.25% of the options will vest at the end of each subsequent

three-month period thereafter over the course of the following three (3) years.

Pursuant to an acceleration mechanism, any outstanding

and unvested options shall immediately accelerate and vest upon the occurrence of certain events, including, inter alia, a merger or

sale of all assets of the Company.

(3) 33.33% of the options

granted will vest on the first anniversary date of the option grant, and 8.33% of the options will vest at the end of each subsequent

three-month period thereafter over the course of the following two (2) years.

Pursuant to an acceleration mechanism, any outstanding

and unvested options shall immediately accelerate and vest upon the occurrence of certain events, including, inter alia, a merger or

sale of all assets of the Company.

Chief Software Architect

November 15, 2028

September 19, 2030

VP Research and Development

on the fair market value of our Common Stock on December 31, 2023 ($3.05 per share).

of the options granted will vest on the first anniversary date of the option grant, and 8.33% of the options will vest at the end

of each subsequent three-month period thereafter over the course of the following two (2) years.

Pursuant to an acceleration mechanism,

any outstanding and unvested options shall immediately accelerate and vest upon the occurrence of certain events, including, inter

alia, a merger or sale of all assets of the Company.

of the options granted will vest on the first anniversary date of the option grant, and 6.25% of the options will vest at the end

of each subsequent three-month period thereafter over the course of the following three (3) years.

Pursuant to an acceleration mechanism,

any outstanding and unvested options shall immediately accelerate and vest upon the occurrence of certain events, including, inter

alia, a merger or sale of all assets of the Company.

or Similar Benefit Plans

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following table sets out the compensation paid to directors for services rendered during the year ended December 31, 2023.

Fees Earned or

Stock Awards (*)

Option Awards (*)

$ in thousands

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Ronen Rosenbloom (2)

Lior Amit (1)

Moshe (Mori) Arkin

Zeev Vurembrand

Ronit Rubin (3)

Jackson Schneider (3)

Nir Nimrodi (4)

as director of Odysight.ai Inc.

until December 6, 2023.

as director of Odysight.ai Inc.

until June 1, 2023.

as a director of Odysight.ai Inc.

since December 6, 2023.

as a director of Odysight.ai Inc.

since August 13, 2023.

amount shown in the “Stock Awards” and “Option Awards” columns represents the aggregate grant date fair value

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March 15, 2020, our board of directors approved a quarterly fee of $4,000 payable to each of our currently serving directors, excluding

Professor Benad Goldwasser.

On each of April, 9, 2021 and August 12, 2021, our board of directors approved the same terms for directors

appointed subsequent to March 15, 2020.

On May 15, 2022, the board of directors approved a quarterly fee in the amount of $2,000 payable

to a director for each committee on which such director serves, if any, with such fee in addition to any other fees to which such director

is entitled as a member of the board of directors or any other committee.

On each of April, 9, 2021 and August 12, 2021, our board of directors approved the same terms for directors appointed

subsequent to March 15, 2020.

On May 15, 2022, the board of directors approved a quarterly fee in the amount of $2,000 payable to a director

for each committee on which such director serves, if any, with such fee in addition to any other fees to which such director is entitled

as a member of the board of directors or any other committee.

July 31, 2019, the Company entered into a consulting agreement with Prof.

Goldwasser, whereby Prof.

Goldwasser agreed to serve as chairman

of the Board of Directors of the Company.

Effective retroactively to March 1, 2019, services as chairman under the agreement were provided

in consideration for a monthly fee of $10,000 and a grant of options to purchase Common Stock of the Company representing 5% of the fully

diluted share capital of the Company post issuance of the then-next financing round, subject to certain limitations.

The Options, which

will have a six-year term, will vest in eight equal semi-annual installments over a period of four years with an exercise price per share

calculated based on a 25% discount on the sale price of the Common Stock in the then-next fund raising of the Company and accelerated

vesting upon closing of a material transaction resulting in change of control of the Company and/or in case Prof.

Goldwasser is dismissed

not for cause, with other terms and limitations as provided in the consulting agreement.

November 22, 2023, our board of directors approved a separate compensation arrangement with Mr.

Jackson Schneider, subject to his election

as a director, which took place on December 6, 2023.

In light of the special role and contributions that Mr.

Schneider is expected to

make to the operation of the Company, the Board approved compensation that includes an annual fee of $80,000, which will be paid on a

monthly basis in equal installments, and a recommendation to the Board to grant Mr.

Schneider options to purchase a total of 50,000 shares

of common stock at an exercise price per share equal to $3.00 per share, vesting over a period of three years and such other terms as

provided in a Director Service Agreement signed between Mr.

Schneider and the Company.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder matters

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table below provides information regarding the beneficial ownership of our common stock as of March 26, 2024, of (i) each of our current

directors, (ii) each of the Named Executive Officers, (iii) all of our current directors and officers as a group, and (iv) each person

or entity known to us who owns more than 5% of our common stock.

directors, (ii) each of the Named Executive Officers, (iii) all of our current directors and

officers as a group, and (iv) each person or entity known to us who owns more than 5% of our common stock.

percentage of common stock beneficially owned is based on 10,446,685 shares of common stock outstanding as of March 26, 2024.

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be outstanding for the purpose of computing the percentage of shares beneficially owned of any other person or entity.

otherwise indicated below, the address for each beneficial owner listed in the table below is c/o ScoutCam Inc., Suite 7A and 3B, Industrial

otherwise indicated below, the address for each beneficial owner listed in the table below is c/o Odysight.ai Inc., Suite 7A, Industrial

Box 3030, Omer, Israel 8496500.

Name and Address of Beneficial Owner

Amount and Nature

of Beneficial

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Benad Goldwasser (2)

Shmuel Donnerstein (3)

Ronen Rosenbloom (4)

Lior Amit (5)

Inbal Kreiss (3)

1 unchanged sentence

Zeev Vurembrand (5)

Yehu Ofer (6)

Tanya Yosef (7)

Amir Govrin (10)

Katrin Dlugach (11)

Arik Priel (12)

Jacob Avinu (8)

Jackson Schneider

Directors and officers as a group (11 individuals)

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Less than 1%.

Beneficial ownership is

determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

Each of the beneficial owners named in the table have, to our knowledge, direct ownership of and sole voting and investment power

with respect to the shares of common stock beneficially owned by them.

Includes options to purchase

386,692 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Includes options to purchase

51,717 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Includes options to purchase

19,728 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Includes options to purchase

33,082 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Includes options to purchase

10,683 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to

Each of the beneficial owners named in the table have, to our knowledge, direct ownership of and sole voting and investment

power with respect to the shares of common stock beneficially owned by them.

options to purchase 435,290 shares of common stock which are currently exercisable or will become exercisable within 60 days of March

options to purchase 16,025 shares of common stock which are currently exercisable or will become exercisable within 60 days of March

included herein are held directly by Mr.

Moshe Arkin, Mr.

Arkin through his individual retirement account, or by M.

Ltd, a company wholly-owned by Mr.

These securities include warrants to purchase 2,575,164 shares of common stock and options

to purchase 15,721 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28,

Includes options to purchase

9,347 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Includes options to purchase 41,460 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Includes options to purchase 82,874 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Includes options to purchase 51,414 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Includes options to purchase 19,999 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

Based on information provided to or available to the Company, consists of warrants to purchase 485,343 shares of common stock.

Arkin through his individual retirement account at Phoenix Insurance Company

Ltd., or by M.

Arkin (1999) Ltd, a company wholly-owned by Mr.

These securities include warrants to purchase 2,575,164 shares

of Common Stock and options to purchase 21,581 shares of Common Stock which are currently exercisable or will become exercisable

within 60 days of March 26, 2024.

of options to purchase 14,689 shares of common stock which are currently exercisable or will become exercisable within 60 days of

March 26, 2024.

of options to purchase 149,992 shares of common stock which are currently exercisable or will become exercisable within 60 days of

March 26, 2024.

of options to purchase 47,387 shares of common stock which are currently exercisable or will become exercisable within 60 days of

March 26, 2024.

options to purchase 49,997 shares of common stock which are currently exercisable or will become exercisable within 60 days of March

on information provided to or available to the Company, includes of warrants to purchase 470,159 shares of common stock Consists

of options to purchase 470,159 shares of common stock which are currently exercisable or will become exercisable within 60 days

of March 26, 2024.

The business address of the More Group is BSR Tower 1, 2 Ben Gurion Street, Ramat Gan, Israel.

Based on information provided to or available to the Company and on the Schedule 13G/A filed by The Phoenix Holdings with the SEC on February 14, 2023, which provides that the securities are beneficially owned by various direct or indirect, majority or wholly-owned subsidiaries of the Phoenix Holdings Ltd.

(the “Subsidiaries”).

The Subsidiaries manage their own funds and/or the funds of others, including for holders of exchange-traded notes or various insurance policies, members of pension or provident funds, unit holders of mutual funds, and portfolio management clients.

Each of the Subsidiaries operates under independent management and makes its own independent voting and investment decisions.

These securities include 1,620,189 warrants to purchase shares of common stock, which are currently exercisable or will become exercisable within 60 days of March 28, 2023.

The business address of the Phoenix Holdings Ltd.

on information provided to or available to the Company and on the Schedule 13G/A filed by The Phoenix Holdings with the SEC on February

12, 2024, securities included herein are held directly by Phoenix Insurance and Phoenix Amitim, majority or wholly-owned subsidiaries

of the Phoenix Holdings Ltd.

In general, subsidiaries of the Phoenix Holdings Ltd.

manage their own funds and/or the funds of others,

including for holders of exchange-traded notes or various insurance policies, members of pension or provident funds, unit holders

of mutual funds, and portfolio management clients.

Each subsidiary operates under independent management and makes its own independent

voting and investment decisions.

These securities include 1,620,189 warrants to purchase shares of Common Stock, which are currently

exercisable or will become exercisable within 60 days of March 26, 2024.

Not included as beneficially owned

by The Phoenix Holdings are shares of Common Stock held by Mr.

Arkin through his individual retirement account at Phoenix Insurance

Company Ltd.;

rather, as indicated in footnote 4 above, these shares of Common Stock are beneficially owned by Mr.

address of the Phoenix Holdings Ltd.

is Derech Hashalom 53, Givataim 53454, Israel.

Based on information provided to or available to the Company, consists of warrants to purchase 455,068 shares of common stock.

on information provided to or available to the Company, includes warrants to purchase 458,054 shares of common stock which are

currently exercisable or will become exercisable within 60 days of March 26, 2024.

On June 1, 2023, a stock transfer

agreement was entered into by and among Medigus Ltd., L.I.A.

Pure Capital Ltd., Mr.

Eli Yoresh and Ms.

Cheli Menashe, as sellers, and

Arkin (1999) Ltd., The Phoenix Insurance Company Ltd., Shotfut Menayot Israel – Phoenix Amitim, Lior Prosor, Prof.

Benad Goldwasser

Yehu Ofer, as purchasers.

Pursuant to the agreement, the sellers sold an aggregate of 2,022,964 shares of our Common Stock to

the purchasers for $6.07 million (equal to $3.00 per share).

Medigus sold 1,924,575 shares, representing its entire beneficial ownership

in the Company as follows:

Arkin (1999) Ltd.

purchased 1,293,576 shares;

(ii) The Phoenix Insurance Company Ltd.

purchased 65,000

(iii) Shotfut Menayot Israel – Phoenix Amitim purchased 368,333 shares;

Lior Prosor purchased 33,333 shares;

Goldwasser purchased 150,000 shares:

Ofer purchased 14,333 shares of our Common Stock.

Pure Capital Ltd.

an aggregate of 78,900 shares of our Common Stock to M.

Arkin (1999) Ltd.

Eli Yoresh sold 11,156 shares of our Common Stock to M.

Arkin (1999) Ltd.).

Cheli Menashe sold 8,333 shares of our Common Stock to M.

Arkin (1999) Ltd.

Concurrently, each of Mr.

Arkin, Phoenix

Insurance and Phoenix Amitim provided written consent to the inclusion in a Registration Statement on Form S-1 currently pending with

the SEC but not yet declared effective as of the date of this Annual Report of the Common Stock acquired by each of the other purchasers

in the stock transfer agreement, including Prof.

Goldwasser, Mr.

Prosor, and we have included in a Registration Statement

on Form S-1 currently pending with the SEC but not yet declared effective as of the date of this Annual Report the Common Stock acquired

by each such purchaser (except as to certain shares of Common Stock acquired by Mr.

Goldwasser is chairman of our board

of directors.

Ofer is our chief executive officer.

Following the transaction, Mr.

Arkin, who currently serves as a director on our

board of directors, beneficially owns more than 50% of our outstanding shares of Common Stock.

Certain relationships and related transactions, and director independence

Party Transactions

April 20, 2020, Medigus and ScoutCam Ltd.

following section describes various related party transactions.

Pursuant to a stock transfer agreement dated June 1, 2023, Medigus

sold all of its shares of our Common Stock, following which sale Medigus beneficially owned none of our Common Stock and ceased to be

a “related person”.

April 20, 2020, Medigus and Odysight.ai Ltd.

entered into an Intercompany Services Agreement, which amended and restated the intercompany

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for additional one-year periods, unless either party provides 60 (sixty) days written notice of non-renewal.

Either Medigus or ScoutCam

Either Medigus or Odysight.ai

may terminate the agreement for convenience upon providing 60 days prior written notice.

The services to be provided by ScoutCam

The services to be provided by Odysight.ai

include the provision of office space, utilities, car services, insurance, and chief financial officer services.

In consideration

for the foregoing services, ScoutCam Ltd.

is entitled to arm’s length service fees based on the most recent transfer pricing analysis

as performed by an external expert, which may be adjusted from time to time.

On March 22, 2022, ScoutCam Ltd.

provided prior written

notice to Medigus of termination of the Intercompany Services Agreement effective May 21, 2022.

May 18, 2020, we entered into and consummated a securities purchase agreement with M.

Arkin (1999) Ltd.

(“Arkin Ltd.”), a

company wholly-owned by Moshe Arkin, a major shareholder of our Company and member of our board of directors, in connection with the

sale and issuance of 229,569 units (“Arkin Units”), at a purchase price of $8.712 per Arkin Unit, and for an aggregate purchase

price of $2,000,000 (the “Arkin Transaction”).

Each Arkin Unit consists of:

(i) two shares of common stock and (ii) (a) one

warrant to purchase one share of common stock with an exercise price of $5.355 (“Warrant A”) and (b) two warrants, each to

purchase one share of common stock with an exercise price of $8.037 (“Warrant B”, and together with Warrant A, the “Arkin

The shares of common stock and Arkin Warrants were issued to Arkin Ltd.

pursuant to Regulation S of the Securities

Act of 1933, as amended.

on May 18, 2020, and in connection with the Arkin Transaction, we, Medigus and Arkin Ltd.

entered into a Voting Agreement, pursuant to

which Arkin Ltd.

and Medigus each agreed to vote their respective shares of common stock in favor of the election of the opposite party’s

designated representative(s), as applicable, to our board of directors.

Each of Arkin Ltd.’s and Medigus’ rights under the

Voting Agreement are contingent upon, inter alia, such party maintaining certain beneficial ownership thresholds in our company.

on May 18, 2020, in connection with the Arkin Transaction, we, Medigus and Arkin, entered into the Letter Agreement, whereby, provided

that we obtain certain regulatory approvals described therein, we and Medigus agreed to amend certain terms of the Amended and Restated

Asset Transfer Agreement and the License Agreement, thereby transferring outright certain patent assets from Medigus to us;

however, that in the event that we neglect the foregoing patent assets, we must transfer back ownership of the patent assets to Medigus

for no additional consideration and absent any additional contingencies.

On July 27, 2020, Medigus and ScoutCam Ltd.

entered into each

of the Addendum No.

1 to the Amended and Restated Asset Transfer Agreement, or the Addendum, and the Patent License Agreement Termination,

in order to reflect and effect the amendments agreed upon in the Letter Agreement.

on January 1, 2021 and as of the date hereof, our board of directors authorized the allotment of options to purchase 128,334 shares of

common stock to Prof.

Benad Goldwasser and an aggregate of 901,842 options and RSUs to purchase shares of common stock to additional

directors and certain officers of our company.

March 29, 2021, we issued to certain investors, including M.

Arkin (1999) Ltd., 2,469,156 units in exchange for an aggregate purchase

price of $20 million.

Each such unit consists of (i) one share of common stock and (ii) one warrant to purchase one share of common stock

with an exercise price of $10.35 per share.

for the foregoing services, Odysight.ai Ltd.

is entitled to arm’s length service fees based on the most recent transfer pricing

analysis as performed by an external expert, which may be adjusted from time to time.

On March 22, 2022, Odysight.ai Ltd.

provided prior

written notice to Medigus of termination of the Intercompany Services Agreement effective May 21, 2022.

January 1, 2021 and as of the date hereof, our board of directors authorized the allotment of options to purchase 278,334 shares of Common

Stock to Prof.

Benad Goldwasser and an aggregate of 1,406,842 options and RSUs to purchase shares of Common Stock to certain officers

and directors of our Company.

March 29, 2021, we issued to certain investors, including Arkin Ltd., 2,469,156 units in exchange for an aggregate purchase price of

Each such unit consists of (i) one share of Common Stock and (ii) one warrant to purchase one share of Common Stock with

an exercise price of $10.35 per share.

Each such warrant is exercisable until the close of business on March 31, 2026.

to the terms of the foregoing warrants, following April 1, 2024, if the closing price of our the common stock equal or exceeds 135% of

the aforementioned exercise price (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other

similar transactions after the issue date of the warrants) for any thirty (30) consecutive trading days, we may force the exercise of

the warrants, in whole or in part, by delivering to these investors a notice of forced exercise.

The shares of common stock and the warrants

were issued to such investors pursuant to Regulation S of the Securities Act of 1933, as amended.

The securities issued in connection

with the foregoing investment were registered by us for resale under a registration statement on Form S-1 declared effective on May 10,

On March 16, 2023, we entered

into and consummated securities purchase agreements with (i) Moshe Arkin through his individual retirement account and (ii) The Phoenix

Insurance Company Ltd.

(“Phoenix Insurance”) and Shotfut Menayot Israel – Phoenix Amitim (“Phoenix Amitim”),

in connection with the sale and issuance of an aggregate of 3,294,117 units, at a purchase price of $4.25 per unit, and for an aggregate

purchase price of $14,000,000.

Pursuant to the

terms of the foregoing warrants, following April 1, 2024, if the closing price of our the Common Stock equal or exceeds 135% of the aforementioned

exercise price (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions

after the issue date of the warrants) for any thirty (30) consecutive trading days, we may force the exercise of the warrants, in whole

or in part, by delivering to these investors a notice of forced exercise.

The shares of Common Stock and the warrants were issued to

such investors pursuant to Regulation S of the Securities Act of 1933, as amended.

The securities issued in connection with the foregoing

investment were registered by us for resale under a registration statement on Form S-1 declared effective on May 10, 2021.

March 16, 2023, we entered into and consummated securities purchase agreements with (i) Phoenix Insurance Company Ltd.

(for Moshe Arkin

through his individual retirement account) and (ii) Phoenix Insurance, and Phoenix Amitim, in connection with the sale and issuance

of an aggregate of 3,294,117 units, at a purchase price of $4.25 per unit, and for an aggregate purchase price of $14,000,000 (the “Private

Each unit consists of:

(i) one share of common stock and (ii) one warrant to purchase one share of common

stock with an exercise price of $5.50.

(i) one share of Common Stock and (ii) one warrant to purchase one share of Common Stock with

an exercise price of $5.50 (the “Warrants”).

The Warrants are immediately exercisable and will expire three (3) years from

the date of issuance and will be subject to customary adjustments.

In connection with the Private Placement, we undertook to file a Registration

Statement on Form S-1 with the Securities and Exchange Commission covering the resale of the shares of Common Stock issued pursuant to

the Private Placement, the shares of Common Stock underlying the Warrants issued pursuant to the Private Placement, and any other shares

of Common Stock and shares of Common Stock underlying warrants to the extent previously issued to Mr.

Arkin, Phoenix Insurance or Phoenix

We further undertook that the Registration Statement on Form S-1 would not include any shares of Common Stock or other securities

for the account of any other holder without the prior written consent of Mr.

Arkin, Phoenix Insurance and Phoenix Amitim.

Arkin, Phoenix Insurance and Phoenix Amitim are existing shareholders of the Company.

The shares of common stock and warrants were issued pursuant to Regulation S of the Securities Act of 1933, as amended.

The shares of Common Stock and warrants were issued

pursuant to Regulation S of the Securities Act of 1933, as amended.

During 2022 and 2023 the Company

received development services in the amount of $117,000 and $29,000, respectively, from Smartec R&D Ltd., a company owned by our former

CTO, Amir Govrin.

and Procedures for Related Party Transactions

audit committee is responsible for approving or ratifying related person transactions pursuant to ScoutCam’s related person transaction

approval policy contained in the audit committee charter.

In reviewing and approving any such related person transactions, the audit

committee shall consider all relevant facts and circumstances, including whether the transaction is on terms comparable to those that

could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction.

audit committee shall have the authority to establish guidelines for related person transactions and intercompany arrangements where

audit committee is responsible for approving or ratifying related person transactions pursuant to Odysight.ai’s related person

transaction approval policy contained in the audit committee charter.

In reviewing and approving any such related person transactions,

the audit committee shall consider all relevant facts and circumstances, including whether the transaction is on terms comparable to

those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction.

The audit committee shall have the authority to establish guidelines for related person transactions and intercompany arrangements where

it deems it to be appropriate.

board of directors has determined that Professor Benad Goldwasser, Mr.

Shmuel Donnerstein, Ms.

Inbal Kreiss, Mr.

Lior Amit and Mr.

Vurembrand do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities

of a director and that each of these directors is “independent”.

We are not currently subject to listing requirements of

any national securities exchange, which generally stipulate certain requirements that a majority of a company’s board of directors

be classified as “independent”.

As a result, we are not at this time required to have our board of directors comprised of

a majority of “independent directors”.

Notwithstanding the foregoing, we have voluntarily adopted the definition of “independent”

as defined under Nasdaq Rule 5605(a)(2), and believe Professor Goldwasser, Mr.

Donnerstein, Ms.

Vurembrand qualify

Jackson Schneider, Ms.

Inbal Kreiss, Ms.

Ronit Rubin, Mr.

Vurembrand and Mr.

Nir Nimrodi do not have a relationship that would interfere with the exercise of independent judgment in carrying

out the responsibilities of a director and that each of these directors is “independent”.

We are not currently subject to

listing requirements of any national securities exchange, which generally stipulate certain requirements that a majority of a company’s

board of directors be classified as “independent”.

As a result, we are not at this time required to have our board of directors

comprised of a majority of “independent directors”.

Notwithstanding the foregoing, we have voluntarily adopted the definition

of “independent” as defined under Nasdaq Rule 5605(a)(2), and believe Professor Goldwasser, Mr.

Schneider, Ms.

Vurembrand and Mr.

Nimrodi qualify accordingly.

Principal accounting fees and services

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following table sets forth the fees billed to our Company for professional services rendered by Brightman Almagor Zohar & Co., a

firm in the Deloitte global network, and Kesselman & Kesselman, a member of PricwaterhouseCoopers International Limited, for the

fiscal years ended December 31, 2021 and December 31, 2022:

firm in the Deloitte global network, for the fiscal years ended December 31, 2022 and December 31, 2023:

December 31, 2023

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fees consist of audit and review services, consents and review of documents filed with the SEC.

fees consist of services related to representing the Company before the Israel Tax Authority in a VAT assessment.

Fees in 2022 were for services rendered by Brightman Almagor Zohar & Co., a firm in the Deloitte global network.

Fees in 2021 consist of $123,000 in connection with the services rendered by Brightman Almagor Zohar & Co., a firm in the Deloitte

global network, and $117,000in connection with the services rendered by Kesselman & Kesselman, a member of PricwaterhouseCoopers

International Limited.

fees consist of services related to representing the Company before the ITA in a VAT assessment.

Committee Administration of Engagement

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exhibits AND financial statement schedules

Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1.4 to our Quarterly Report on Form 10-Q filed with the SEC on August 12, 2021)

Amended and Restated Bylaws

Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1.1 to our Form S-1 filed with the SEC on July 17, 2023)

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed with the SEC on June 8, 2023)

Description of the Registrant’s Securities

Amended and Restated Asset Transfer Agreement, by and between ScoutCam Ltd.

Amended and Restated Asset Transfer Agreement, by and between Odysight.ai Ltd.

and Medigus Ltd., dated December 1, 2019 (incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)

Consulting Agreement by and between ScoutCam Ltd.

Consulting Agreement by and between Odysight.ai Ltd.

Benad Goldwasser, dated July 31, 2019 (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)

2020 Share Incentive Plan

Form of Notice of Option Grant and Option Agreement

Form of Notice of RSU Grant and RSU Agreement

Employment Agreement, by and between ScoutCam Ltd.

and Amir Govrin, dated May 1, 2019 (incorporated by reference to Exhibit 10.20 to our Form S-1 filed with the SEC on May 12, 2020)

Employment Agreement, by and between ScoutCam Ltd.

and Tanya Yosef, dated January 14, 2021 (incorporated by reference to Exhibit 10.21 to our Annual Report on Form 10-K filed with the SEC on March 31, 2021)

Employment Agreement, by and between ScoutCam Ltd.

and Katrin Dlugach, dated July 1, 2019 (incorporated by reference to Exhibit 10.22 to our Annual Report on Form 10-K filed with the SEC on March 31, 2021)

Voting Agreement, dated May 18, 2020, by and among ScoutCam Inc.

Arkin (1999) Ltd.

(incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on May 19, 2020)

1 to the Amended and Restated Asset Transfer Agreement, dated July 27, 2020, by and between ScoutCam Ltd.

2020 Share Incentive Plan (incorporated by reference to Exhibit 10.3 to our Annual Report on Form 10-K filed with the SEC on March 28, 2023)

Form of Notice of Option Grant and Option Agreement (incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K filed with the SEC on March 28, 2023)

Form of Notice of RSU Grant and RSU Agreement (incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K filed with the SEC on March 28, 2023)

Employment Agreement of Eli Israeli, dated September 19, 2023 (incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-1/A filed with the SEC on December 20, 2023)

Employment Agreement of Tanya Yosef, dated January 14, 2021 (incorporated by reference to Exhibit 10.21 to our Annual Report on Form 10-K filed with the SEC on March 31, 2021)

1 to the Amended and Restated Asset Transfer Agreement, dated July 27, 2020, by and between Odysight.ai Ltd.

and Medigus Ltd.

(incorporated by reference to Exhibit 10.30 to our Registration Statement on Form S-1/A filed with the SEC on October 19, 2021)

Purchase Order Form, between ScoutCam Inc.

Purchase Order Form, between Odysight.ai Inc.

and the Investors in the March 2021 Private Placement (incorporated by reference to Exhibit 10.34 to our Registration Statement on Form S-1 filed with the SEC on May 4, 2021)

Form of Warrant (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the SEC on March 24, 2021)

Employment Agreement, dated October 26 , 2021, by and between ScoutCam Ltd.

and Arik Priel (incorporated by reference to Exhibit 10.23 to our Annual Report on Form 10-K filed with the SEC on March 30, 2022)

Employment Agreement, dated July 13, 2022, by and between ScoutCam Ltd.

and Yehu Ofer (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on October 18, 2022)

Employment Agreement dated September 20, 2022, by and between ScoutCam Ltd.

and Jacob Avinu.

Employment Agreement of Yehu Ofer, dated July 13, 2022 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on October 18, 2022)

Employment Agreement of Jacob Avinu, dated September 20, 2022 (incorporated by reference to Exhibit 10.14 to our Registration Statement on Form S-1 filed with the SEC on July 17, 2023)

Employment agreement of Ido Molad, dated May 21,2023 (incorporated by reference to Exhibit 10.14 to our Form S-1 filed with the SEC on February 20, 2023)

Form of Warrant to Purchase Shares of Common Stock (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on March 17, 2023)

Stock Purchase Agreement, dated March 16, 2023 by and between ScoutCam Inc.

and the Investors defined therein .

(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 17, 2023)

Stock Purchase Agreement, dated March 16, 2023 by and between ScoutCam Inc.

Stock Purchase Agreement, dated March 16, 2023 by and between Odysight.ai Inc.

and the Investors defined therein (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 17, 2023)

Stock Purchase Agreement, dated March 16, 2023 by and between Odysight.ai Inc.

and the Investors defined therein.

(incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on March 17, 2023)

Registration Rights Agreement, dated March 16, 2023, among ScoutCam Inc.

Registration Rights Agreement, dated March 16, 2023, among Odysight.ai Inc.

and the Investor defined therein (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on March 17, 2023)

Registration Rights Agreement, dated March 16, 2023, among ScoutCam Inc.

Registration Rights Agreement, dated March 16, 2023, among Odysight.ai Inc.

and the Investor defined therein (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on March 17, 2023)

Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to our Current Report on Form 8-K filed with the SEC on December 31, 2019)

Director Appointment and Service Agreement of Jackson Schneider, dated December 6, 2023 (incorporated by reference to Exhibit 10.18 to our Registration Statement on Form S-1/A filed with the SEC on December 20, 2023)

Securities Exchange Agreement, dated September 16, 2019, by and among Medigus Ltd.

and Intellisense Solutions Inc.

(incorporated by reference to Exhibit 99.2 to the report on Form 6-K filed by Medigus Ltd.

on September 17, 2019)

Stock Transfer Agreement, dated June 1, 2023, by and among M.

Arkin (1999) Ltd.

and additional purchasers listed therein, and Medigus Ltd.

and additional sellers listed therein (incorporated by reference to Exhibit 10.22 to our Form S-1 filed with the SEC on February 20, 2023)

Subsidiaries of the Registrant

Consent of Brightman Almagor Zohar & Co., a Firm in the Deloitte Global Network

Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and Principal Financial Officer

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Financial Officer

Financial Officer and Principal Accounting Officer)

Financial and Accounting Officer)

Benad Goldwasser

Shmuel Donnerstein

Ronen Rosenbloom

Jackson Shneider

Zeev Vurembrand

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the shareholders and the Board of Directors of Scoutcam Inc.

the shareholders and the Board of Directors of Odysight.ai Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheets of Scoutcam Inc.

have audited the accompanying consolidated balance sheets of Odysight.ai Inc.

and its Subsidiary (the “Company”) as of December

31, 2022 and 2021, the related consolidated statements of operations, changes in shareholders’ equity and cash flows for each of

the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial

31, 2023 and 2022, the related consolidated statements of operations, changes in shareholders’ equity and cash flows, for each

of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial

statements”).

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consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Audit Matter Description

Company issues various types of equity awards, including stock options.

During the year ended December 31, 2022, the Company recorded

stock options related compensation expense of $1.49 million.

The Company estimated the fair value of these stock options granted using

the Black-Scholes option pricing model.

The Black-Scholes option-pricing model required management to make a number of assumptions, of

which the most significant are the stock price volatility and the expected option term.

the Company’s accounting of stock-based options required auditor judgment due to the subjectivity of assumptions used to estimate the

fair value of stock-based options granted.

the year ended December 31, 2023, the Company recorded stock options related compensation expense of $1,664 thousand.

The Company estimated

the fair value of these stock options granted using the Black-Scholes option pricing model.

The Black-Scholes option-pricing model required

management to make a number of assumptions, of which the most significant are the stock price volatility and the expected option term.

the Company’s accounting of stock-based options required auditor judgment due to the subjectivity of assumptions used to estimate

the fair value of stock-based options granted.

the Critical Audit Matter Was Addressed in the Audit

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evaluated the appropriateness of the valuation method used for the stock option grants and

whether the method used for determining fair value was applied consistently with the valuation

of similar grants in prior periods.

whether the method used for determining fair value was applied appropriately.

evaluated the significant assumptions used by management to calculate the fair value of stock

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have served as the Company’s auditor since 2020.

(Formerly known as ScoutCam Inc.)

BALANCE SHEETS

and cash equivalents

terms deposits

CURRENT ASSETS:

Cash and cash equivalents

Short terms deposits

Accounts receivable

Other current assets

current assets

fulfillment assets

and equipment, net

lease right-of-use assets

NON-CURRENT ASSETS:

and shareholders’ equity

liabilities - short term

lease liabilities - short term

compensation expenses

accrued expenses

Contract fulfillment assets

Property and equipment, net

Operating lease right-of-use assets

Severance pay asset

Other non-current assets

non-current assets

Liabilities and shareholders’

CURRENT LIABILITIES:

liabilities - long term

lease liabilities - long term

for severance pay

Accounts payable

Contract liabilities - short term

Operating lease liabilities - short term

Accrued compensation expenses

Related parties

Other current liabilities

current liabilities

NON-CURRENT LIABILITIES:

SHAREHOLDERS’

stock, $ 0.001 par

300,000,000 shares authorized

as of December 31, 2022 and December 31, 2021, 7,121,737

shares issued and outstanding as of December 31, 2022 and December 31, 2021

paid-in capital

Contract liabilities - long term

Operating lease liabilities - long term

Liability for severance pay

Other non-current

non-current liabilities

SHAREHOLDERS’ EQUITY:

Common stock, $ 0.001 par value;

300,000,000 shares authorized as of

December 31, 2023 and December 31, 2022, 10,443,768 and 7,121,737 shares issued and outstanding as of December 31, 2023 and December

Additional paid-in capital

Accumulated deficit

TOTAL SHAREHOLDERS’

LIABILITIES AND SHAREHOLDERS’ EQUITY

accompanying notes are an integral part of these consolidated financial statements.

(Formerly known as ScoutCam Inc.)

STATEMENTS OF OPERATIONS

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(except per share data)

AND DEVELOPMENT EXPENSES

AND MARKETING EXPENSES

COST OF REVENUES

GROSS PROFIT (LOSS)

RESEARCH AND DEVELOPMENT

SALES AND MARKETING EXPENSES

AND ADMINISTRATIVE EXPENSES

OPERATING LOSS

INCOME (EXPENSES), NET

BEFORE TAXES ON INCOME

loss per share (basic and diluted, in USD)

average common shares (basic and diluted, in thousands)

LOSS BEFORE TAXES ON INCOME

Net loss per share (basic

and diluted, in USD)

Weighted average common

shares (basic and diluted, in thousands)

accompanying notes are an integral part of these consolidated financial statements.

(Formerly known as ScoutCam Inc.)

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

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Shareholders’ equity

at January 1, 2022

based compensation (see note 9)

at December 31, 2022

Balance at January 1, 2023

Stock based compensation (see note 9)

Issuance of shares upon RSU vesting (see note

Issuance of shares and warrants(see note 9)

Balance at December

paid-in capital

Accumulated deficit

Shareholders’ equity

at January 1, 2021

of shares and warrants (see note 9)

of warrants (see note 9)

based compensation (see note 9)

up of shares due to reverse stock split (see note 9)

at December 31, 2021

USD in thousands

Balance at January 1, 2022

Stock based compensation (see note 9)

Balance at December 31, 2022

an amount less than $1 thousand.

accompanying notes are an integral part of these consolidated financial statements.

(Formerly known as ScoutCam Inc.)

STATEMENTS OF CASH FLOWS

ended December 31,

FLOWS FROM OPERATING ACTIVITIES:

to reconcile net loss to net cash used in operating activities:

based compensation

(loss) from exchange differences on cash and cash equivalents

from exchange differences from operating lease liabilities

pay asset and liability

income in respect of deposits

IN OPERATING ASSET AND LIABILITY:

CASH FLOWS FROM OPERATING

Adjustments to reconcile

net loss to net cash used in operating activities:

Stock based compensation

Profit (loss) from exchange differences on

cash and cash equivalents

Interest and exchange differences from operating

lease liability

Severance pay asset and liability

Interest income in respect of deposits

CHANGES IN OPERATING ASSET

AND LIABILITY:

Increase in accounts receivable

(increase) in inventory

(decrease) in operating lease liability

Decrease (increase) in inventory

Increase in operating lease liability

Increase in ROU asset

(increase) in other current assets

in account payables

Decrease (increase) in current and non-current

Increase (decrease) in account payable

Decrease in contract fulfillment assets

in contract liabilities

(decrease) in accrued compensation expenses

in related parties

in other accrued expenses

cash flows used in operating activities

FLOWS FROM INVESTING ACTIVITIES:

of property and equipment

of short terms deposits

in short terms deposits

cash flows provided by (used in) investing activities

FLOWS FROM FINANCING ACTIVITIES:

from issuance of shares and warrants

from exercise of warrants

cash flows provided by financing activities

IN CASH AND CASH EQUIVALENTS

OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

Increase (decrease) in current and non-current

contract liabilities

Increase in accrued compensation expenses

Increase (decrease) in related parties

Increase (decrease) in

current and non-current other liabilities

Net cash flows used in operating activities

CASH FLOWS FROM INVESTING

Purchase of property

and equipment

Withdrawal of short terms deposits

Investment in short

terms deposits

Net cash flows provided by (used in) investing

CASH FLOWS FROM FINANCING

Proceeds from issuance of shares and warrants

Net cash flows provided

by financing activities

INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS

BALANCE OF CASH AND CASH

EQUIVALENTS AT BEGINNING OF YEAR

FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS

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ended December 31,

cash activities

assets obtained in exchange for operating lease liabilities

in property and equipment through a decrease in advances to suppliers

accompanying notes are an integral part of these consolidated financial statements.

Non cash activities

Right-of-use assets obtained in exchange for

operating lease liabilities

Termination of right-of-use assets in exchange

for cancellation of operating lease obligations

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 – GENERAL :

ScoutCam Inc.

(the “Company”),

formerly known as Intellisense Solutions Inc., (“Intellisense”), was incorporated under the laws of the State of Nevada

on March 22, 2013.

Inc (the “Company”), formerly known as ScoutCam Inc., was incorporated under the laws of the State of Nevada on March

Prior to the closing of the Exchange Agreement (as defined below), the Company was a non-operating “shell

The Company’s wholly-owned

subsidiary, ScoutCam Ltd.

(“ScoutCam”), was formed in the State of Israel on January 3, 2019, as a wholly-owned subsidiary

of Medigus Ltd.

(“Medigus”), an Israeli company traded on the Nasdaq Capital Market, and commenced operations on March

In December 2019, Medigus

and ScoutCam consummated an asset transfer agreement, under which Medigus transferred and assigned certain assets and intellectual

property rights related to its miniaturized imaging business to ScoutCam.

On December 30, 2019, Intellisense

and Medigus consummated a securities exchange agreement (the “Exchange Agreement”), pursuant to which Medigus delivered

100% of its holdings in ScoutCam to Intellisense in exchange for shares of Intellisense’s common stock representing 60% of

the issued and outstanding share capital of Intellisense immediately upon the consummation of the Exchange Agreement.

As of December 31, 2022,

Medigus beneficially owned 27.02% of the Company’s outstanding common stock.

Company, through ScoutCam, is engaged in the development, production and marketing of innovative Predictive Maintenance (PdM) and

Condition Based Monitoring (CBM) technologies, providing visual sensing and AI-based video analytics solutions for critical systems

in the aviation, maritime, industrial non-destructing-testing industries, transportation, and energy industries.

Company’s products utilize our micro visualization technology in medical devices for complex and minimally invasive medical

Company’s technology includes proven video technologies and products amalgamated into a first-of-its-kind,

FDA-cleared minimally invasive surgical device.

The Company’s 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.

The Company’s

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 wide range of industry segments, that utilize complicated mechanics requiring ongoing monitoring and

predictive maintenance applications.

TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 – GENERAL (continued) :

August 9, 2021, the Company amended its Articles of Incorporation to effect a nine-to-one

reverse stock split of its outstanding Common Stock.

a result of the reverse stock split, every nine shares of the Company’s outstanding Common Stock were combined and reclassified

into one share of the Company’s Common Stock.

No fractional shares were issued in connection with or following the reverse

The amount of authorized capital of the Company’s Common Stock and par value of such shares remained unchanged.

share, stock option and per share information in these consolidated financial statements have been adjusted to reflect the reverse

stock split on a retroactive basis.

incorporation of ScoutCam and through December 31, 2022, the Company accumulated a deficit of approximately $ 25 million

and its activities have been funded mainly by its shareholders.

The Company’s management believes the Company’ cash and

cash resources as of December 31, 2022 as well as its proceeds from issuance of common stock and warrants in the private offering as

detailed in Note 14, will allow the Company to fund its operating plan through at least the

next 12 months.

However, the Company expects to continue to incur significant research and development and other costs related to its

ongoing operations and in order to continue its future operations, the Company will need to obtain additional funding until becoming profitable.

June 5, 2023, the Company filed with the Nevada Secretary of State a Certificate of Amendment to the Registrant’s Articles

of Incorporation to change its name from “ScoutCam Inc.” to “Odysight.ai Inc.”, effective June 5, 2023.

Company’s wholly owned subsidiary, Odysight.ai Ltd (“Odysight.ai”), formerly known as ScoutCam Ltd., was formed

in the State of Israel on January 3, 2019, as a wholly-owned subsidiary of Medigus Ltd.

(“Medigus”), an Israeli company

traded on the Nasdaq Capital Market, and commenced operations on March 1, 2019.

December 2019, Medigus and Odysight.ai consummated an asset transfer agreement, under which Medigus transferred and assigned certain

assets and intellectual property rights related to its miniaturized imaging business to Odysight.ai.

December 30, 2019, the Company and Medigus consummated a securities exchange agreement (the “Exchange Agreement”), pursuant

to which Medigus delivered 100 % of its holdings in Odysight.ai to the Company in exchange for shares of the Company’s common

stock representing 60 % of the issued and outstanding share capital of the Company immediately upon the consummation of the Exchange

2020-2023 Medigus decreased its holdings in the Company such that as of March 31, 2023, Medigus owned 18.45 % of the Company’s

outstanding common stock.

On June 1, 2023, Medigus sold all of its holdings in the Company to existing shareholders and to Chairman

of the Board and CEO of the Company.

February 28, 2024, D.

was formed in the State of Israel, wholly owned by Odysight.ai Inc., to act as a local agent for

the defense market in Israel.

Company, through Odysight.ai, provides image-based platforms.

Through the use of its proprietary visualization technology, Odysight.ai

offers solutions across predictive maintenance and condition-based monitoring markets, in sectors such as energy, automotive and

Odysight.ai’s solutions are based on small and highly resilient cameras, specialized AI analysis and supplementary

technologies.

Some of the Company’s products utilize micro visualization technology in medical devices for minimally invasive

medical procedures.

incorporation of Odysight.ai and through December 31, 2023, the Company accumulated a deficit of approximately $ 34.2 million and

its activities have been funded mainly by its shareholders.

The Company’s management believes the Company’ cash and cash

resources will allow the Company to fund its operating plan through at least the next 12 months from the filing date of these Consolidated Financial Statements.

However, the Company expects to continue to incur significant research and development

and other costs related to its ongoing operations, requiring the Company to obtain additional funding in order to continue its future

operations until becoming profitable.

On October 7, 2023, Hamas terrorists infiltrated Israel’s southern

border from the Gaza Strip and conducted a series of attacks on civilian and military targets, which led Israel to formally declare war

on Hamas the next day.

The war is ongoing as of the issuance date of these financial statements.

At this stage, the Company does not expect

substantial impact of the above-described events on its operations.

TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 – SIGNIFICANT ACCOUNTING POLICIES :

of preparation :

Basis of preparation :

consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles in the

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GAAP”) applied on a consistent basis.

Use of estimates

preparation of financial statements in conformity with U.S.

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The Company evaluates its assumptions on an

ongoing basis, including those related to contingencies and inventory impairment, as well as estimates used in applying

its revenue recognition policy.

ongoing basis, including those related to contingencies and inventory impairment, as well as estimates used in applying its revenue recognition

Actual results may differ from these estimates.

majority of ScoutCam’s revenues are generated in U.S.

The substantial majority of ScoutCam costs are incurred in U.S.

Functional currency

majority of Odysight.ai’s revenues are generated in U.S.

The substantial majority of Odysight.ai costs are incurred in

dollars and New Israeli Shekels (“NIS”).

ScoutCam management believes that the U.S.

dollar is the currency of the primary

economic environment in which ScoutCam operates.

Thus, the functional currency of ScoutCam is the U.S.

Odysight.ai management believes that the U.S.

dollar is the currency of the

primary economic environment in which Odysight.ai operates.

Thus, the functional currency of Odysight.ai is the U.S.

and balances originally denominated in U.S.

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Currency transaction gains and losses are presented in financial income or expenses, as

and Cash Equivalents

Cash and Cash Equivalents

Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits with original

1 unchanged sentence

to known amounts of cash.

bank deposits

Short-term bank deposits

deposits with maturities of more than three months but less than one year are included in short-term bank deposits.

1 unchanged sentence

deposits are stated at cost which approximates fair market value.

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 - SIGNIFICANT ACCOUNTING POLICIES (continued) :

Accounts receivable

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

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or the related account receivable.

of December 31, 2022 and 2021, no allowance for doubtful accounts was recorded.

and equipment

As of December 31, 2023 and 2022, no allowance

for doubtful accounts was recorded.

Property and equipment

and equipment are stated at cost, net of accumulated depreciation and amortization.

3 unchanged sentences

SCHEDULE OF PROPERTY AND EQUIPMENT ANNUAL DEPRECIATION RATES

and laboratory equipment

furniture and equipment

and computer software

Machinery and laboratory equipment

Office furniture and equipment

Computers and computer software

Leasehold improvements

the shorter of the lease term (including options if any) or useful life

Severance pay

labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other

circumstances.

Pursuant to Section 14 of the Severance Compensation Act, 1963 (“Section 14”), all of the ScoutCam’s

Pursuant to Section 14 of the Severance Compensation Act, 1963 (“Section 14”), all of the Odysight.ai’s

employees in Israel are entitled to a monthly contribution, at a rate of 8.33 % of their monthly salary, made in their name with insurance

Contributions under Section 14 relieve ScoutCam from any future severance payment obligation with respect to those employees.

Contributions under Section 14 relieve Odysight.ai from any future severance payment obligation with respect to those employees.

The aforementioned contributions are not recorded as an asset on the Company’s balance sheet and there is no liability recorded,

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application of Section 14.

severance pay liability of ScoutCam to its employees that began employment prior to automatic application of Section 14 is based upon

severance pay liability of Odysight.ai to its employees that began employment prior to automatic application of Section 14 is based upon

the number of years of service and the latest monthly salary of such employees and is partly covered by regular deposits with recognized

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to certain limitations, are the property of the employees.

ScoutCam records the obligation as if it were payable at each balance sheet

Odysight.ai records the obligation as if it were payable at each balance sheet

date on an undiscounted basis.

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 - SIGNIFICANT ACCOUNTING POLICIES (continued) :

Company measures and recognizes compensation expense for its equity classified stock-based awards granted under its plan based on estimated

fair values on the grant dates.

The Company calculates the estimated fair value of option awards on the grant date using the Black-Scholes

option-pricing model.

The Black-Scholes option-pricing model requires a number of assumptions, of which the most significant are the

stock price volatility and the expected option term.

The Company’s expected dividend rate is zero since the Company does not currently

pay cash dividends on its stocks and does not anticipate doing so in the foreseeable future.

Each of the above factors requires the Company

to use judgment and make estimates in determining the percentages and time periods used for the calculation.

If the Company were to use

different percentages or time periods, the estimated fair value of option awards could be materially different.

The Company recognizes

stock-based compensation cost for option awards on an accelerated basis over the employee’s requisite service period, net of estimated

Stock-Based Compensation

The Company applies the fair value recognition provisions

of ASC 718, Compensation—Stock Compensation, or ASC 718, for stock-based awards granted to employees, directors, and other providers

for their services.

Company measures and recognizes compensation expense for its equity classified stock-based awards granted under its plan based on

estimated fair values on the grant dates.

The Company calculates the estimated fair value of option awards on the grant date using

the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires a number of assumptions, of which the most

significant are the stock price volatility and the expected option term.

The Company’s expected dividend rate is zero since

the Company does not currently pay cash dividends on its stocks and does not anticipate doing so in the foreseeable future.

Volatility is derived from the historical volatility of publicly traded set of peer companies.

The risk-free interest rates used in

the Black-Scholes calculations are based on the prevailing U.S.

Treasury yield as determined by the U.S.

Federal Reserve.

weighted average expected life of options was estimated individually in respect of each grant.

Each of the above factors requires

the Company to use judgment and make estimates in determining the percentages and time periods used for the calculation.

Company were to use different percentages or time periods, the estimated fair value of option awards could be materially different.

The Company recognizes stock-based compensation cost for option awards on an accelerated basis over the employee’s requisite

service period, forfeitures are accounted for as they occur.

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

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demand, technology developments and market conditions.

Revenue recognition

Company’s revenues are measured according to the ASC 606, “Revenue from Contracts with Customers” (“ASC 606”).

Under ASC 606, revenues are measured according to the amount of consideration that the Company expects to be entitled

to receive in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third

Revenues are presented net of VAT.

Under ASC 606, revenues are measured according to the amount of consideration that the Company expects to be entitled to receive in exchange

for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Revenues are presented

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

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

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

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of the project and are then recognized over the expected term production.

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 - SIGNIFICANT ACCOUNTING POLICIES (continued) :

Cost of revenues

of revenue consists of products purchased from sub-contractors, raw materials for in-house assembly line, shipping and handling costs

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to incur losses.

and development costs

IIA grants are offset against cost revenues.

Research and development costs

and development costs are expensed as incurred and includes salaries and employee-related expenses, overhead expenses, material, and

8 unchanged sentences

tax positions are accounted for in accordance with the provisions of ASC 740-10, under which a company may recognize the tax benefit

from an uncertain tax position claimed or expected to be claimed on a tax return only if it is more likely than not that the tax

position will be sustained on examination by the taxation authorities, based on the technical merits of the position, at the largest

benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

Interest and penalties, if any,

related to unrecognized tax benefits are recognized in tax expense.

The Company and ScoutCam provide a valuation allowance,

if necessary, to reduce deferred tax assets to their estimated realizable value.

contingencies

from an uncertain tax position claimed or expected to be claimed on a tax return only if it is more likely than not that the tax position

will be sustained on examination by the taxation authorities, based on the technical merits of the position, at the largest benefit that

has a greater than fifty percent likelihood of being realized upon ultimate settlement.

Interest and penalties, if any, related to unrecognized

tax benefits are recognized in tax expense.

The Company and Odysight.ai provide a valuation allowance, if necessary, to reduce deferred

tax assets to their estimated realizable value.

Legal contingencies

The Company follows ASC 450-20,

Loss Contingencies, to report accounting for contingencies.

time to time, the Company and its subsidiary become involved in legal proceedings or are subject to claims arising in their ordinary

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Such matters are generally subject to many uncertainties and outcomes are not predictable with assurance.

accrues for contingencies when the loss is probable and can reasonably estimate the amount of any such loss.

Company accrues for contingencies when the loss is probable and can reasonably estimate the amount of any such loss.

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 — SIGNIFICANT ACCOUNTING POLICIES (continued):

and diluted net loss per common stock :

net loss per common stock is computed by dividing net loss, as adjusted, to include the weighted average number of shares of common stock

outstanding during the year.

net loss per common stock is computed by dividing net loss, as adjusted, by the weighted average number of shares of common stock outstanding

during the year, plus the number of shares of common stock that would have been outstanding if all potentially dilutive shares of common

stock had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per Share”.

and diluted net loss per share of common stock :

net loss per share of common stock is computed by dividing net loss, as adjusted, to include the weighted average number of shares

of common stock outstanding during the year.

net loss per share of common stock is computed by dividing net loss, as adjusted, by the weighted average number of shares of common

stock outstanding during the year, plus the number of shares of common stock that would have been outstanding if all potentially

dilutive shares of common stock had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per

outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share for the years ended December

31, 2023 and December 31, 2022, since all such securities have an anti-dilutive effect.

accordance with ASC 842, the Company determines whether an arrangement is or contains a lease

based on the facts and circumstances present at inception of an arrangement.

An arrangement is or contains a lease if the arrangement conveys the

right to control the use of an identified asset for a period of time in exchange for consideration.

that are determined to be leases at inception are recognized in long-term right-of-use assets (“ROU”) assets and short and

accordance with ASC 842, the Company determines whether an arrangement is or contains a lease based on the facts and circumstances present

at inception of an arrangement.

An arrangement is or contains a lease if the arrangement conveys the right to control the use of an identified

asset for a period of time in exchange for consideration.

that are determined to be leases at inception are recognized as long-term right-of-use (“ROU”) assets and short and

long-term lease liabilities in the consolidated balance sheet at lease commencement.

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Company has elected not to recognize on the balance sheet leases with terms of 12 months or less.

TO THE CONSOLIDATED FINANCIAL STATEMENTS

New accounting pronouncements

issued accounting pronouncements, not yet adopted

December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” This guidance

is intended to enhance the transparency and decision-usefulness of income tax disclosures.

The amendments in ASU 2023-09 address investor

requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid

both in the U.S.

and in foreign jurisdictions.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective

Early adoption is permitted, with the option to apply the standard retrospectively.

The Company does not expect any significant impact from the adoption of this standard.

3 - SHORT-TERM DEPOSITS :

term investments as of December 31, 2022 include bank deposit bearing annual interest rates of 4 %, with maturities of up to 12 months.

term deposits as of December 31, 2023 bearing annual interest rates of 7.2 % and 6.3 %, with maturities of up

to 12 months.

4 - INVENTORY :

SCHEDULE OF INVENTORY

materials and supplies

Raw materials and supplies

Work in progress

Finished goods

Inventory Net

the years 2023 and 2022, no impairment occurred.

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SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT NET

and laboratory equipment

improvements, office furniture and equipment

and computer software

property and equipment, gross

Machinery and laboratory equipment

Leasehold improvements, office furniture and

Computers and computer

Total property and equipment, gross

accumulated deprecation

property and equipment, net

Total property and equipment,

expenses were $ 284 thousand and $ 251 thousand for the years ended December 31, 2023 and 2022, respectively.

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

6 – OTHER ACCRUED EXPENSES :

6 – OTHER CURRENT LIABILITIES:

SCHEDULE OF OTHER ACCRUED EXPENSES

Revenue Services

other accrued expenses

Government authorities

Accrued expenses

Other payables

Total other accrued expenses

7 - INCOME TAXES :

Tax rates applicable to the income of the Israeli subsidiary:

ScoutCam is taxed according to Israeli tax laws.

The Israeli corporate tax rate from the year 2018 and

onwards is 23 %.

Tax rates applicable to the income of the U.S.

rates applicable to the income of the Israeli subsidiary:

is taxed according to Israeli tax laws.

Israeli corporate tax rate from the year 2018 and onwards is 23 %.

rates applicable to the income of the U.S.

Company is taxed according to U.S.

corporate tax rate from the year 2018 and onwards

corporate tax rate from the year 2018 and onwards is 21 %.

income taxes:

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SCHEDULE OF COMPONENT OF DEFERRED TAX ASSET

USD in thousands

Operating loss carryforward

loss carryforward

Net deferred tax asset before valuation allowance

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Net deferred tax

of December 31, 2022, the Company has provided a full valuation allowance of $ 6,069 thousand in respect

of deferred tax assets resulting from tax loss carryforward and other temporary differences.

Management currently believes that because

the Company has a history of losses, it is more likely than not that the deferred tax regarding the loss carryforward and other temporary

differences will not be realized in the foreseeable future.

of December 31, 2023, the Company has provided a full valuation allowance of $ 5,786 thousand in respect of deferred tax assets resulting

from tax loss carryforwards and other temporary differences.

Management currently believes that because the Company has a history

of losses, it is more likely than not that the deferred tax regarding the loss carryforward and other temporary differences will

not be realized in the foreseeable future.

carryforward tax losses:

As of December 31, 2022, the Company has an accumulated tax loss carryforward of approximately $ 26,295 thousand.

Carryforward tax losses in Israel

are of unlimited duration.

Under the Tax Cut and Jobs Act of 2017, or the Tax Act (subject to modifications under the Coronavirus Aid,

Relief, and Economic Security Act), federal net operating losses (NOL) incurred in taxable years ending after December 31, 2017 and in

future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited.

It is uncertain

if and to what extent various states will conform to the newly enacted federal tax law.

of December 31, 2023, the Company has an accumulated tax loss carryforward of approximately $ 25,006 thousand.

Carryforward tax losses

in Israel are of unlimited duration.

Under the Tax Cut and Jobs Act of 2017, or the Tax Act (subject to modifications under the Coronavirus

Aid, Relief, and Economic Security Act), federal net operating losses (NOL) incurred in taxable years ending after December 31, 2017

and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited.

is uncertain if and to what extent various states will conform to the newly enacted federal tax law.

addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation

undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change, by value, in its

equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change

tax attributes to offset its post-change income or taxes may be limited.

Such limitations may result in the expiration of net operating

losses before utilization.

The main reconciling item between the statutory tax rate of the Company

and the effective tax rate is the recognition of valuation allowance in respect of deferred taxes relating to accumulated net operating

losses carried forward due to the uncertainty of the realization of such deferred taxes.

of December 31, 2021, ScoutCam owed NIS 740 thousand, (approximately $ 229 thousand) in additional

taxes to the Israel Tax Authority following a VAT audit in Israel for 2019-2021.

November 18, 2021, ScoutCam filed an appeal to the Israeli Tax Authority on the finding of the VAT audit.

to the uncertainty regarding the outcome of the appeal, the financial statements as of December 31, 2021 included a provision

related to the additional taxes of $ 229

thousand, which was included in general and administrative expenses in the statement of operation report.

July 2022, ScoutCam reached an agreement with the Israeli Tax Authority, according to which the amount due in additional taxes was

reduced to NIS 340 thousand (approximately $ 100 thousand).

undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change, by value, in

its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other

pre-change tax attributes to offset its post-change income or taxes may be limited.

Such limitations may result in the expiration

of net operating losses before utilization.

main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowance

in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization

of such deferred taxes.

of December 31, 2021, Odysight.ai owed NIS 740 thousand, (approximately $ 229 thousand) in additional taxes to the Israel Tax Authority

following a VAT audit in Israel for 2019-2021.

November 18, 2021, Odysight.ai filed an appeal to the Israeli Tax Authority on the finding of the VAT audit.

to the uncertainty regarding the outcome of the appeal, the financial statements as of December 31, 2021 included a provision related

to the additional taxes of $ 229 thousand, which was included in general and administrative expenses in the statement of operation

July 2022, Odysight.ai reached an agreement with the Israeli Tax Authority, according to which the amount due in additional taxes

was reduced to NIS 340 thousand (approximately $ 100 thousand).

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

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OF BALANCES WITH RELATED PARTIES

Directors (directors’ accrued compensation)

(see note 8c)

May 18, 2020, the Company allocated in a private issuance to M.

Arkin (1999) Ltd.

(“Arkin”) a total of 229,569 units

(as described in note 9c) at a purchase price of $ 8.712 per unit (“Arkin Transaction”).

In connection with the Arkin Transaction, the Company, Medigus

and Arkin entered into a voting agreement, pursuant to which Arkin and Medigus each agreed to vote their respective shares of common

stock in favor of the election of the opposite party’s designated representative(s), as applicable, to the Board (“Voting

Each of Arkin’s and Medigus’ rights under the Voting Agreement are contingent upon, inter alia, such party

maintaining a certain beneficial ownership threshold in the Company’ as follows:

One person designated by Arkin is to be elected, for as long as Arkin, continues to beneficially own at least eight percent of the

issued and outstanding capital stock of the Company.

Three persons designated by Medigus are to be elected, for as long as Medigus, continues to beneficially own at least thirty five

percent of the issued and outstanding capital stock of the Company.

Two persons designated by Medigus are to be elected for as long as Medigus, continues to beneficially own less than thirty five percent

and more than twenty percent of the issued and outstanding capital stock of the Company.

One person designated by Medigus is to be elected for as long as Medigus, continues to beneficially

own less than twenty percent and more than eight percent of the issued and outstanding capital

stock of the Company.

2021 and 2022 the Company received development services from Smartec R&D Ltd., a company owned by the Company’s CTO.

Directors (directors’ accrued

compensation)

Smartec R&D Ltd.

(see note 8b)

Related parties

2022 and 2023 the Company received development services from Smartec R&D Ltd., a company owned by the Company’s former

compensation for the fiscal years ended December 31, 2022 and December 31, 2023 was $ 117 thousands and $ 29 thousands, respectively.

2021 the Company received financial consultant services from Anona De Finance Ltd., a company owned by one of the Company’s

expenses for the fiscal years ended December 31, 2021 was approximately $ 37 thousands.

TO THE CONSOLIDATED FINANCIAL STATEMENTS

of the authorized share capital

2 unchanged sentences

shall be consisting of 300,000,000 shares of common stock.

December 2019, the Company allocated in a private placement, a total of 379,269 units at a purchase price of $ 8.712 per unit.

unit was comprised of two shares of common stock par value $0.001 per share, one Warrant A (as described below) and two Warrants

B (as described below) .

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

Warrant A was exercisable into one share of common stock of the Company at an exercise price of $ 5.355 per share during the 12 month

period following the allocation.

Each Warrant B is exercisable into one share of common stock of the Company at an exercise price of

$ 8.037 per share during the 18 month period following the allocation.

addition, Shrem Zilberman Group Ltd.

(the “Consultant”) will be entitled to receive the amount representing 3 % of any exercise

price of each Warrant A or Warrant B that may be exercised in the future.

In the event the total proceeds received as a result of exercise

of warrants will be less than $ 2 million at the time of their expiration, the Consultant will be required to invest $ 250,000 in the Company

in return for shares of common stock of Company.

As of December 31, 2021, holders of the foregoing warrants have exercised in excess

of $ 2 million and, accordingly, the Consultant is not required to invest $ 250,000 in the Company.

2020, 332,551 Warrants A were exercised, and 46,718 unexercised Warrants A expired on December 30, 2020 .

Consultant received $ 53 thousand following the exercise of 332,551 Warrants A.

the second quarter of 2021, 185,271 Warrants B were exercised, and 573,256 unexercised Warrants B expired on June 30, 2021 .

Consultant received $ 45 thousand following the exercise of 185,271 Warrants B.

March 3, 2020, the Company issued in a private placement a total of 108,880 units at a purchase price of $ 8.712 per unit.

unit was comprised of two shares of common stock par value $0.001 per share, one Warrant A (as described below) and two Warrants B (as

described below) .

Warrant A was exercisable into one share of common stock of the Company at an exercise price of $ 5.355 per share during the 12 month

period following the allocation.

Warrant B is exercisable into one share of common stock of the Company at an exercise price of $ 8.037 per share during the 18 month period

following the allocation.

gross proceeds from the issuance of all securities offered amounted to approximately $ 948 thousands.

After deducting issuance costs,

the Company received proceeds of approximately $ 909 thousand.

TO THE CONSOLIDATED FINANCIAL STATEMENTS

9 – EQUITY (continued):

2021, 108,880 Warrants A were exercised.

unexercised Warrants B expired on September 3, 2021 .

May 18, 2020, the Company allocated in a private placement to Arkin a total of 229,569 units at a purchase price of $ 8.712 per unit.

unit was comprised of two shares of common stock par value $0.001 per share, one Warrant A (as described below) and two Warrants B (as

described below) .

Warrant A was exercisable into one share of common stock of the Company at an exercise price of $ 5.355 per share during the 18 month

period following the allocation.

Warrant B is exercisable into one share of common stock of the Company at an exercise price of $ 8.037 per share during the 24 month period

following the allocation.

gross proceeds from the issuance of all securities offered amounted to approximately $ 2 million.

After deducting issuance costs, the

Company received proceeds of approximately $ 1.9 million.

February 2021, 37,349 Warrants A were exercised.

November 2021, 192,220 Warrants A were exercised.

June 23, 2020, (the “Conversion Date”), the Company entered into a side letter

agreement with Medigus whereby the parties agreed to convert, at a conversion price of $ 4.356

per share, an outstanding line of credit previously extended by Medigus to ScoutCam, which

as of the Conversion Date had $ 381,136 outstanding, into (a) 87,497 shares of the Company’s

common stock, (b) to 43,749 Warrant A (as described below), and (c) 87,497 Warrant B (as

described below).

As the conversion price represented the same unit price as in the March

2020 and May 2020 private placements, no finance expenses have been recorded in statement

of operations as a result of the conversion.

Warrant A is exercisable into one share of common stock of the Company at an exercise price of $ 5.355 per share during the 12 months

period following the allocation.

Warrant B is exercisable into one share of common stock of the Company at an exercise price of $ 8.037 per share during the 18 months

period following the allocation.

June 2021, 43,749 Warrants A were exercised.

December 23, 2021, 87,497 unexercised Warrants B expired.

March 29, 2021, the Company issued to certain investors, including Arkin, a major stockholder of the Company, of which Mori Arkin,

8 unchanged sentences

in whole or in part, by delivering to these investors a notice of forced exercise.

March 16, 2023, the Company consummated a Stock Purchase Agreements for a private placement with (i) Moshe Arkin and (ii) The Phoenix Insurance Company Ltd.

and Shotfut Menayot Israel – Phoenix Amitim, in connection with

the sale and issuance of an aggregated amount of 3,294,117 units (collectively, the “Units”), at a purchase price of

$ 4.25 per Unit, and for an aggregated purchase price of $ 14,000,000 .

Each Unit consists of:

(i) one share of the Company’s

common stock with par value of $ 0.001 per share (the “Common Stock”) and (ii) one warrant to purchase one share of Common

Stock with an exercise price of $ 5.50 (the “Warrants”).

The Warrants are immediately exercisable and will expire three

years from the date of issuance and will be subject to customary adjustments.

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

OF STOCK WARRANTS OUTSTANDING TO PURCHASE COMMON STOCK

Per Share ($)

of common stock

Exercise Price

March 2021 Warrant

March 29, 2021

March 27, 2023

compensation to employees, directors and service providers:

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777,778 shares of common stock.

During the first quarter of 2023, the Company’s Board of Directors approved an increase to the

option pool pursuant to the Plan by an additional 1,000,000 shares of common stock.

Plan is designed to enable the Company to grant options to purchase shares of common stock and RSUs under various and different tax regimes

7 unchanged sentences

granted generally have a contractual term of seven years and vest over a period of three to four years .

TO THE CONSOLIDATED FINANCIAL STATEMENTS

9 – EQUITY (continued):

5 unchanged sentences

Intrinsic Value (in thousands)

- December 31, 2020

- December 31, 2021

- December 31, 2022

Exercisable - December 31, 2022

Outstanding - January 1, 2022

Outstanding - December 31, 2022

Outstanding - December 31, 2023

Options Exercisable - December 31, 2023

of December 31, 2023, the aggregate intrinsic value of options granted is calculated as the difference between the exercise price and

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using Black-Scholes option-pricing model based on the following assumptions:

OF SHARE-BASED PAYMENT,STOCK OPTIONS, VALUATION ASSUMPTIONS

value of shares ($)

volatility (%)

of the options (years)

interest rate (%)

1.98 %- 3.95 %

0.78 % - 1.51 %

based on underlying value of shares of

$ 3 , exercise price of $ 3 -$ 4.5 , expected volatility of 88 %- 90 %, term of the options – 7 years and risk-free interest rate 3.93 %- 4.47 %.

is derived from the historical volatility of publicly traded set of peer companies.

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approximately $ 1.93 million and is expected to be recognized over a weighted-average period of 1.38 years.

2022 and 2021 the Company’s Board of Directors authorized the grant of options to purchase 45,000 shares of common stock of

the Company and 83,334 shares of common stock of the Company,

respectively, to Prof.

2023 and 2022 the Company’s Board of Directors authorized the grant of options to purchase 150,000

shares of common stock of the Company and 45,000

shares of common stock of the Company, respectively, to Prof.

Goldwasser, the Chairman of the Board.

Total expenses recorded regarding this grant, for the year

ended December 31, 2022, and December 31, 2021, are $ 367 thousand and $ 255 thousand, respectively.

During 2021 the Company’s Board of Directors

authorized the grant of options to purchase 75,855 shares of common stock of the Company to directors of the Company.

Total expenses

recorded regarding this grant, for the year ended December 31, 2022, and December 31, 2021, are $ 213 thousand and $ 221 thousand, respectively.

2023 the Company’s Board of Directors authorized the grant of options to purchase 260,000

shares of common stock of the Company to directors of the Company.

2023 and 2022 the Company’s Board of Directors authorized the grant of options to purchase 225,000

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shares of common stock of the Company, respectively, to certain officers of the Company.

Total expenses recorded regarding this grant,

for the year ended December 31, 2022, and December 31, 2021, are $523 thousand and $871 thousand, respectively.

Compensation expense recorded by the Company in respect of its stock-based

employees, directors and service providers compensation awards in accordance with ASC 718-10 for the year ended December 31, 2022 and

2021 amounted to $ 1,487 thousands and $ 2,030 thousands, respectively.

expense recorded by the Company in respect of its stock-based employees, directors and service providers compensation awards in

accordance with ASC 718-10 for the year ended December 31, 2023 and 2022 amounted to $ 1,664

thousands and $ 1,638

thousands, respectively.

stock unit (“RSU”) to employees and service providers:

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following table summarizes RSU activity for December 31, 2023:

OF STOCK OPTION ACTIVITY

Average Remaining Contractual Term (years)

- December 31, 2021

and Outstanding - December 31, 2022

unrecognized compensation expense calculated under the fair-value method for RSU expected to vest as of December 31, 2022 is approximately

SCHEDULE OF STOCK OPTION ACTIVITY

Amount of RSUs

Weighted Average Grant Date Fair Value per Share

Weighted Average Remaining Contractual Term (years)

Outstanding - December 31, 2022

Unvested and Outstanding - December 31, 2023

unrecognized compensation expense calculated under the fair-value method for RSUs expected to vest as of December 31, 2023 is approximately

$ 70 thousand and is expected to be recognized over a weighted-average period of 1.15 years.

2022 the Company’s Board of Directors authorized the grant of options to purchase 90,000

shares of common stock of the Company to certain

officers of the Company.

Total expenses recorded regarding this grant, for the year ended December 31, 2022, are $ 127 thousand.

The following table sets forth the total stock-based

payment expenses resulting from options and RSU granted, included in the statements of operation and comprehensive income:

OF STOCK-BASED PAYMENT EXPENSE

Year ended on

USD in thousands

Cost of revenues

Research and development

Sales and marketing expenses

General and administrative

Total expenses

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

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OF DISAGGREGATION OF REVENUE

Services (customer A) (*)

During the second quarter

of 2022, the Company completed the development of the product relating to a customer-specific project for a Fortune 500 multinational healthcare

corporation (“Customer A”) and moved from the development

phase of the project to its production phase.

As a result, during the year ended December 31, 2022, the Company recognized development

services revenues and related development costs that had been previously deferred, in the amounts of $ 317 thousand and $ 180 thousand,

respectively.

Development Services (customer

the second quarter of 2022, the Company completed the development of to a customer-specific project for a Fortune 500 multinational

healthcare corporation (“Customer A”) and moved from the development phase of the project to its production phase.

result, during the year ended December 31, 2023, the Company recognized development services revenues and related development costs

that had been previously deferred, in the amounts of $ 422

thousand and $ 239 thousand, respectively.

The amounts were recognized based on the expected manufacturing term of the product, which the Company estimates at 7

addition, following the commencement of the production phase, the Company recognized product revenues of $ 221

thousands during the year ended December 31,

2022 from the sale of units of the product developed in the context of these development services.

addition, following the commencement of the production phase, the Company recognized product revenues of $ 2,514 thousands during

the year ended December 31, 2023 from the sale of units of the product developed in the context of these development services.

by geographical area (based on the location of customers)

1 unchanged sentence

OF REVENUES WITHIN GEOGRAPHIC AREAS

United States

United Kingdom

forth below is a breakdown of Company’s revenue by major customers (major customer –revenues from these customers constituted

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fulfillment assets

liabilities include advance payments, which are primarily related to advanced billings for development services.

liabilities include deferred service and advance payments.

change in contract fulfillment assets:

at beginning of year

during the year

costs recognized during the period

at end of year

Balance at beginning of year

Contract costs recognized

during the period

Balance at end of year

change in contract liabilities:

at beginning of year

revenue relating to new sales

recognized during the year

at end of year

Balance at beginning of year

Deferred revenue relating to new sales

Revenue recognized during

Balance at end of year

Performance Obligations

1 unchanged sentence

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

As of December 31, 2022, the total RPO amounted to $ 3,644 thousand,

which the Company expects to recognize over the expected manufacturing term of the product under development.

As of December 31, 2023, the total RPO amounted to $ 2.3 million, which

the Company expects to recognize over the expected manufacturing term of the product under development.

(Formerly known as ScoutCam Inc.)

TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, the Group’s ROU assets and lease liabilities for operating leases totaled $ 307 thousand and $ 263 thousand, respectively.

December 31, 2021, the Group’s ROU assets and lease liabilities for operating leases totaled $ 482 thousand and $ 459 thousand, respectively.

December 2020, ScoutCam entered into a lease agreement for office space in Omer, Israel.

The agreement is for 36 months beginning January

In March 2021, ScoutCam entered into a lease agreement for additional office space in Omer, Israel.

The agreement is until December

Monthly lease payments under the agreements are approximately $ 12 thousand.

ScoutCam subleases part of the office space to

a third party for $ 3 thousand per month.

December 2022, ScoutCam entered into a lease agreement for office space in Ramat Gan, Israel.

December 2020, Odysight.ai entered into a lease agreement for office space in Omer, Israel (“original space”), with the 36-month

term for such agreement beginning on January 1, 2021 .

In March 2021, Odysight.ai entered into a lease agreement for additional office

space in Omer, Israel (“additional space”), with the term for such agreement is ending December 31, 2023 .

June 25, 2023, Odysight.ai entered into an amendment to these agreements, pursuant to which the lease for the additional space will

be shortened and end on June 30, 2023 and the lease for the original space will be extended for an additional five years until

December 31, 2028.

It was also agreed that Odysight.ai has an option to terminate the agreement for the original space after three

Odysight.ai expect that the lease period

will be three years.

lease payments under the agreement for the original space are approximately $ 7 thousand.

Gan office space

December 2022, Odysight.ai entered into a lease agreement for office space in Ramat Gan, Israel.

The agreement is for 12 months beginning

on December 14, 2022.

The agreement expires on December 14, 2023, and the Company has an option

to extend the lease period for an additional one year.

The Company doesn’t expect to extend the lease period.

Therefore, the Company has elected

to use the practical expedient regarding short-term leases.

Monthly lease payments under the agreements are $ 3 thousand.

on December 14, 2022 and the Company has an option to extend the lease period for an additional one year .

Monthly lease payments under the agreement are $ 3 thousand.

The Company terminate the agreement after 12 months.

May 2023, Odysight.ai entered into an additional lease agreement for office space in Ramat Gan, Israel.

The agreement is for 48 months

beginning on July 1, 2023 and the Company has an option to extend the lease period for an additional two years.

The Company does not

currently expect to extend the lease period.

Monthly lease payments under the agreement are in the amount of approximately $ 25 thousand.

subleases part of the additional office space in Ramat Gan to an unrelated third party for approximately $ 7 thousand per month.

addition, the Company leases vehicles under various operating lease agreements.

lease expenses were $ 264 thousand and $ 202 thousand for the years ended December 31, 2022 and 2021, respectively.

December 31, 2023, the Group’s ROU assets and lease liabilities for operating leases totaled $ 1,380 thousand and $ 1,326 thousand,

respectively.

December 31, 2022, the Group’s ROU assets and lease liabilities for operating leases totaled $ 307 thousand and $ 263 thousand, respectively.

lease expenses were $ 403

thousand and $ 264

thousand for the years ended December 31, 2023 and 2022, respectively.

cash flow information related to operating leases during the period presented was as follows:

1 unchanged sentence

ended December 31,

paid for amounts included in the measurement of lease liabilities:

cash flows from operating leases

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating

term and discount rate related to operating leases as of the period presented were as follows:

OF LEASE TERM AND DISCOUNT RATE RELATED TO OPERATING LEASES

Weighted-average

remaining lease term (in years)

Weighted-average

discount rate

Weighted-average remaining lease

term (in years)

Weighted-average discount rate- leases vehicles

Weighted-average discount rate- leases offices

maturities of lease liabilities under operating leases as of December 31, 2023 are as follows:

OF MATURITIES LEASE LIABILITIES UNDER OPERATING LEASES

undiscounted lease payments

Total undiscounted lease payments

Imputed interest

3 unchanged sentences

ended December 31,

and related expense

and subcontractors

and maintenance and other expenses

Salaries and related expense

Stock-based compensation

Materials and subcontractors

Travel expenses

Vehicle expenses

Rent and maintenance

and other expenses

and Development expenses

13 – SALES AND MARKETING EXPENSES :

OF SALES AND MARKETING EXPENSES

ended December 31,

Salaries and related expense

Stock-based compensation

Business development and marketing

Vehicle expenses

Other expenses

Sales And Marketing Expenses

14 – GENERAL AND ADMINISTRATIVE EXPENSES :

1 unchanged sentence

ended December 31,

and related expense

and maintenance and other expenses

provision (note 7e)

Salaries and related expense

Stock-based compensation

Professional services

Vehicle expenses

Rent and maintenance and other expenses

VAT provision (note

and Administrative expenses

COMMITMENTS AND CONTINGENCIES

On April 2023,

the Company received approval from the Israel Innovation Authority (previously the Office of the Chief Scientist), (the “IIA”)

to support and enhance the Company’s production line and capabilities in the next 24 months until April 2025.

Pursuant to the agreement

with the IIA relating to the program, the Company has to pay royalties of 3% to the IIA up to the amount IIA funding received and the

accrued interest repayment of the grant is contingent upon the Company successfully completing its enhancement plans and generating sales

from the enhancements preformed .

The Company has no obligation to repay these grants if its enhancement plans are not completed or aborted

or if it generates no sales.

the year ended December 31, 2023 grants of $ 60 thousand recorded as cost of revenues in the consolidated statements.

16 - SUBSEQUENT EVENTS :

March 16, 2023, the Company consummated Stock Purchase Agreements for a private placement with (i) Moshe Arkin through his

individual retirement account and (ii) The Phoenix Insurance Company Ltd.

and Shotfut Menayot Israel – Phoenix Amitim, in

connection with the sale and issuance of an aggregate amount of 3,294,117

units (collectively, the “Units”), at a purchase price of $ 4.25

per Unit, and for an aggregate purchase price of $ 14,000,000 .

Each Unit consists of:

(i) one share of the Company’s common stock par value $ 0.001

per share (the “Common Stock”) and (ii) one warrant to purchase one share of Common Stock with an exercise price of

(the “Warrants”).

The Warrants are immediately exercisable and will expire three

years from the date of issuance and will be subject to customary adjustments.

February 28, 2024, D.

was formed in the State of Israel, wholly owned by Odysight.ai Inc., to act as a local agent for the

defense market in Israel.

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 9A. Controls and Procedures